Chain Insights — Crypto Winters: An Opportunity to Build or Hibernate?
Successful projects are built during economic downturns, and your start-up idea could be next.
How did we get here?
Fear and uncertainty have been looming over the global markets for the first half of 2022, and crypto has been no exception. Depegged stablecoins, frozen withdrawals, sharp declines in prices, and layoffs from top exchanges have raised cause for panic in the industry. From a macroeconomic perspective, Americans are experiencing the fastest rise in inflation in 50 years; housing costs and the price of necessities have soared, and the Fed is raising interest rates to calm the effects of their money printing fiasco, that is adding ether to the fire. The U.S S&P 500 is off to its worst start since WWII, and as Bitcoin’s price closely correlates with the stock market, this domino effect has ensued on all of crypto. Seasoned traders, long term investors, and industry leaders are prepared for a recession, and have experienced downward trends like this in the past. It is important to note that market declines and recessions are a part of a healthy economic cycle.
The blockchain industry is still in its youth, and has already overcome several bear markets in its short lifespan. This time around might feel like the end of crypto for newcomers, but the truth is, the engagement surrounding the industry has only skyrocketed. Solana announced the release of a decentralized Web3 smartphone early next year, and conversations about music NFTs have ignited on Twitter after NFT NYC last week. There have been rapid advancements in the GameFi space, and industries ranging from fashion to entertainment want to utilize blockchain technology in their brands. Top players in the crypto space have reigned their way into major league sports stadiums, Super Bowl commercials, and radio stations. Countries are now implementing Bitcoin and other cryptocurrencies to battle inflation, and use it as a form of payment. Above all, more people know about crypto now, than ever before in history.
Constant growth trends are unsustainable for any industry. Consolidation and capitulation patterns are positive indicators that there is financial stability in the markets. We’ve witnessed a similar scenario in the Dot-Com era. Investors poured their money into internet startup companies without a business plan, product, or operational strategy. When many of these early technology stocks flopped, only the top players survived.
Elon Musk, who acquired massive wealth from selling his company ‘PayPal’ during the Dot-Com bubble, said, “Recessions are not necessarily a bad thing. I’ve been through a few of them. And what tends to happen is if you have a boom that goes on too long, you get a misallocation of capital. It starts raining money on fools.” Crypto winters are a critical period for purging the market of empty promises, and celebrating projects with impactful products and track records. Successful projects are going to continue building through economic recessions, and thrive in the next cycle. Such was the case during the dark crypto winter of 2018.
The Great Crypto Crash of 2018
Crypto’s previous bear market in 2018 laid the foundation for the industry we know of today. Those in tune with the crypto space back in 2018 and beyond, recall the bitter speculations and restrictions surrounding the industry at the time. Global adoption was significantly less than it is today; Far Eastern countries such as China, Japan and South Korea imposed stricter regulations, or just banned the mining and trading of cryptocurrencies altogether. These harsh government crackdowns contributed to the poisoning of the public’s perception of cryptocurrency. Crypto Twitter was a ghost town, and few were present to celebrate the 10th anniversary of Bitcoin’s Whitepaper. CEOs of major financial institutions expressed their strong cynicism towards the digital asset class, and wrote it off as a sham during this period.
Though government and institutional support was scarce, and very little enthusiasm for the industry was present, many projects continued to launch during this time. Projects such as MoonPay, built a bridge between traditional payment methods and the cryptocurrency markets. Tezos established itself as a decentralized open-source blockchain protocol, while the mainstream media claimed the technology was “dead”. DeFi lending protocol Aave (formerly known as ETHLend), and DEX’s such as Uniswap initially launched in 2018, and are still dominating their multi-billion dollar space, respectively. Axie Infinity, a blockchain-based game, and Trust Wallet, have stood resiliently during the current market decline as well.
Due to adoption on a retail and government level today, the enthusiasm surrounding blockchain’s capabilities tells us that the space will only continue to expand and adapt to new ideas.
Blockchain is Here to Stay
Google searches containing ‘Web3’ and ‘Bitcoin’ have skyrocketed in the past year, and big players in the space have been responding. “Retail has been experimenting with Web3 brands over a new idea on product ownership, increasing brand awareness and experimenting new ways to create value in their products. The rise of Web3 brands building at the forefront of the metaverse shows organic growth from within the space. Web3 brands like Yuga Labs, The Sandbox, and RTFKT have partnered with numerous retail giants, including Adidas, Nike, HSBC, etc. We are witnessing an exodus of talent from leading Web2 projects into the blockchain world.” says the DappRadar.
Major exchanges and Web3 projects have taken the initiative to educate their new users about the basics of blockchain technology, and how users can safely manage their digital assets. Reports of Silicon Valley’s top talent fleeing their cushy Web2 companies to contribute to developing Web3 applications have made headlines as well. Aside from technical personnel, entrepreneurs are stepping into the space, and are determined on building a plethora of product solutions for the industry. Companies such as Chain, which has been standing tall in the blockchain software solution industry since 2014, support these types of innovators. Chain offers several software services that assist those with big ideas, but little technical expertise in blockchain. Self-starters who wish to build their own wallets, exchanges, or even NFT collections can do so, and manage their ledgers and launch nodes seamlessly. Businesses can utilize these SaaS products to scale their projects at lightning speed, and manage public blockchain networks from their fingertips. Forbes ‘Fintench 50 for 2018’ list included several blockchain and crypto companies, including Chain. Forbes reported Chain as an “office Blockchain technology and ledger balance software, and is described as a threat to inefficient legacy record keeping in finance.”
Google Search Volume for ‘Web3’ spiked in late 2021 — Courtesy of the The Block
Viable Solutions for Building in Web3
For newcomers experiencing their first crypto winter, it may be easy to fall for the hysteria. These times are imperative for cleansing the market of faithless projects and opening the door for optimistic ones to flourish. There have been crypto winters in the past, and companies such as Chain have stood the test of time, and have proven to be resilient through market declines. Although the space feels dull, the growth and maturity surrounding the industry showcased that the crypto space is in a safe position to withstand a prolonged bear market. The impacts of crypto winter will be reversed in due time, and it’s your decision how you want to strategize your time. Bear markets are a great opportunity to build on Chain; the company is optimistic about the future capabilities of blockchain, and has a dedicated team that is at your aid 24/7. Users have stored their confidence in Chain, and have built on the protocol for close to a decade. Chain has expert product support available for clients at any time. While there is still a large learning curve in the adoption of blockchain technology, Chain will continue to focus on filling this gap for users and supporting them build forward-thinking products.
Not enough understanding of the underlying technology, is why Chain is the blockchain infrastructure solution for the future. Blockchain is a legitimate technology which will change the way people interact in the financial, retail, government, and entertainment sectors.
Not Investment Advice
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