by Emma Diskin, Chief Marketing and Communications Officer
Over the last 12 months, we have witnessed myriad advancements in the world of blockchain — new legislation, the introduction of regulation, the creation of blockchain hubs and above all, a tangible vision for the future.
The going has been pretty good for the last few years, with plenty of questionable ICO projects filling their boots and then walking off into the sunset. However, this kind of activity has led to continued scepticism and lack of confidence. The value of cryptocurrencies has been in free fall for a number of months, the headlines are gloomy, and bull runs seem to be a thing of the past. Moreover, as different regulators across the world clamp down, hype is dampened; big dreams crash and FUD just increases. But is a bear market necessarily a bad thing or can blockchain start-ups benefit from this market slowdown?
Firstly, weak or poorly-run projects chasing easy cash are more likely to fail in a bear market, thereby eliminating competition and re-focusing attention on legitimate organisations that do have a real shot at success. A study by Boston College earlier this year found that over half of crypto start-ups die within 4 months of fund-raising through ICOs. Moreover, according to Dead Coins, 934 tokens have died since the ICO boom — that’s 934 projects that channelled investor attention away from the rest of the industry. “Every dollar invested into a soon-to-fail crypto coin is one that won’t go towards supporting tokens with a future, so reducing the number of weak projects on the market can ultimately only help those projects that have a shot at success,” said Brian Kelly, Founder & CEO of crypto investment firm BKCM. In light of the recent SEC rulings, we’re likely to see more dead coins added to the list, with companies that raised funds through a public token sale at risk of being forced to pay back every dollar to their initial investors.
Secondly, securing funding in a booming crypto market is not only a distraction, it’s a competitive sport — reaching or exceeding your hard cap is like some sort of crypto status symbol. However, it takes attention away from what should be the long-term ambition of every crypto project — building a useful product and attracting long-term users. A bear market, when funding is more difficult to secure, forces projects to monetise in a more traditional way, and puts the focus back on building and developing.
Thirdly, a bear market uproots the scammers. Over the past 18 months, an exploding crypto industry has spawned a parallel market for crypto scammers — from fake whitepaper writing and inflated Telegram communities to paid for press coverage and questionable crypto exchanges that fake volume and list tokens without due diligence — all designed to trick crypto investors into parting with their coins. In reducing the number of weak projects, the scammers will have less fodder on which to feed.
This bear market has been pretty painful for both investors and enthusiasts and sentiment is pretty bleak in the blockchain world right now. But this market adjustment could ultimately be the best thing for an industry that is bloated, unstructured and riddled with money-hungry scammers, in allowing legitimate projects, with long-terms ambitions to #BUIDL, to flourish.