David Z. Morris is CoinDesk’s Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.
I was at Messari’s Mainnet conference all day Thursday, which was certainly busy but, it must be said, slightly quieter than CoinDesk’s Consensus festival in June. And it is not to criticize Messari. If Consensus didn’t exist, Mainnet would be the best cryptocurrency conference ever. The difference is simply a matter of timing: Consensus caught the last remnants of a frenzied bull market, while now we are definitely in bear season.
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All bearish cycles in the cryptocurrency sector are greeted with some relief by founders, engineers and other participants, because it represents a kind of liberation from that hamster wheel that chases deposits, users and the attention of the general public. Instead, the bearish cycle allows them to focus on building for the long term, both technologically and strategically.
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Mainnet revealed a snapshot of where projects are focusing their energy during this time. One of the main themes is the financial and engineering push for greater capital efficiency in decentralized finance (DeFi) and other on-chain services; that is, finding ways to gain more influence or liquidity with more security and less damage. That could represent a great competitive difference in the future, although the competition will also produce some excesses and setbacks.
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Another goal – albeit an obvious one – is to create interfaces for cryptocurrency applications that are easier to use. There are also big security questions that have yet to be answered, especially after this week’s new round ofattacks. . That would be an ideal project to work on during a bear market: without the pressure to act fast, you can build things that are harder to break.
Of course, this type of development must be financed, and both income and speculation have been considerably reduced. The good news is that risk investing is still going strong. However, one of the founders who just got funded told me that in a bear market, bigger bets go to fewer entities. In essence, venture capital firms will continue to bet on cryptocurrencies and blockchains, only now they are a bit more selective than they were a year ago.
This is all nice and good, but it is not enough. Thanks to the combination of macroeconomic pressures, such as inflation and the extensive losses suffered by speculators, the big challenge for the bear market—and an unknown that I myself find myself considering for the first time after a decade of covering cryptocurrency— is to make sure there will be another bull market.
Extreme cyclicality has been the hallmark of the cryptocurrency sector since its inception. And it’s certainly not unique: This year we learned that the broader tech market is still experiencing painful downturns three decades after AOL released its first CD-ROM. But cycles in cryptocurrencies can be particularly sharp and damaging because not only is the technology largely speculative, but investors can jump into it with very little restriction or backing.
That is why the current bear market may become the most important in the history of cryptocurrencies. In the unprecedented bull market from 2020 to 2022, a huge number of investors were attracted by past asset returns. Exchanges, non-fungible token (NFT) producers, and other participants interested in retail trading were more than happy to join them for Super Bowl announcements and media appearances. And then, in general, retail trade was severely affected by the bursting of a transient bubble (BTC and ETH) or, much worse, by the collapse of highly flawed projects and even
On Mainnet I was moderating a panel on the strategic balance between caring for whales, daily degens, and “newbs,” also known as normal human beings. The catch for many cryptocurrency projects is that while the big, easy returns come from whales and degens, those users are also super nimble “revolving capital” willing and able to cash out their stakes and move all of their wealth to a new cryptocurrency. system just to get a few extra APR (Annual Percentage Rate) points.
And what is more important, the degens and the whales are speculators and providers of liquidity, not “users” per se. In order to reduce market cyclicality, cryptocurrency projects need to find real use cases that can beat existing services. For now, the obvious cases are still quite limited: cross-country payments (mainly significant for BTC), NFTs (mainly significant for ETH), and to a lesser extent gaming, where there is a huge market but the real advantages of cryptocurrencies are a little less obvious.
There will be many more real end-user products and services added to the list. Some won’t arrive until the technology has advanced much further, be it for performance or user interface issues, but the industry urgently needs them. One last very clear advantage of the bear market is that, with the speculators removed, it is much easier to find and test demand for real products that offer real profits. This is the task facing entrepreneurs in the blockchain segment at the moment.
And finally, a piece of tidbit for those who stayed with me to the end: the Walton family (that one from Walmart) is said to have a budding interest in decentralized autonomous organizations (DAOs). English). And that a second layer blockchain company is just weeks away from announcing a fundraising of staggering proportions. You can be sure of that.
Este artículo fue traducido por Natalia Paulovsky.
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David Z. Morris is CoinDesk’s Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.
David Z. Morris is CoinDesk’s Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.
