A broader downturn in the market, the Terra fiasco, ongoing talks of stricter regulation, tightening monetary policies, and accelerating growth of crypto theft have all contributed to the crypto bear market 2022. While the drop in the price of assets has indeed been shocking, we have been here before. 2018 saw a crypto bear market that many said would be the death of the industry.
What many people didn’t take into account was that:
a) Crypto prices and blockchain development aren’t inextricably linked.
b) Bear market opportunities are there for blockchains, solutions, and applications that show real value.
c) Those that are part of strong communities or who invested in promising projects were rewarded as crypto prices started to pick up again in the lengthy bull run that began at the start of 2020.
In this article, we’ll look at the bear market crypto meaning and explore why the current situation has a surprising number of benefits. Chief among them is better blockchain development, which can help strengthen the sector in general, garnering further investment to spark the next bear market and bring new industry highs.
What does a bear market crypto landscape look like?
Going to the source of clear and concise financial explanations, Investopedia classes a bear market as:
When a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from a recent high [over a sustained period of time—typically two months or more] amid widespread pessimism and negative investor sentiment.
While some may argue over the exact definition of the phase we are in now, most would say we are experiencing the next bear market crypto phase, which has come with some very visible consequences.
Features of this crypto bear market
So what have we seen so far?
- The prices of cryptocurrencies have dropped by about 50-80%.
- Cryptocurrency hedge funds and retailers have caused large outflows.
- Purpose Bitcoin ETF, which was the largest Bitcoin ETF in the world, had to sell $500 million worth of the currency in late June, the largest single-day redemption in its 14-month history.
- As reported in Bloomberg, the senior data analyst at tracker DappRadar, Pedro Herrera, predicted that the 20% of the apps that hold 80% of the industry value would likely survive, while many others would fade away.
While this may initially sound alarming, what does it actually mean? A lot of the negative sentiment is around falling crypto market capitalization, but how much bearing does this have on what really matters for the industry — the development of useful projects on blockchain?
As we will explore in the next section, the bear in crypto, at least for a short time, can result in benefits that you may not have considered.
Bear market benefits
With many investors large and small experiencing a lot of discomfort right now, we’d like to remind you that it’s far from doom and gloom. Here are some clear benefits that come with crypto bear markets.
Now sitting at the fear end of the Fear and Greed Index, it is hard to imagine so many people gambling large amounts on the Squid Game crypto, or putting money into other projects without proper verification. With crypto in bear market, people get more cautious about where they are putting their money, causing less than reputable projects to lose steam or disappear altogether.
This reduction in the prominence of scam projects provides two clear benefits:
1) People lose less of their money
2) The image of the cryptocurrency industry is improved
Both of these points are sorely needed if investors are going to help fund new DeFi projects. According to statistics found in Chainalysis’s 2022 Crypto Crime Report:
- Scamming revenue rose 82% in 2021 to $7.8 billion worth of cryptocurrency stolen from victims.
- Cryptocurrency theft in 2021 had a 516% increase compared to 2020.
- DeFi protocols were the primary avenue for money laundering in 2021, up 1,954% since 2020.
It is obvious that the utopia DeFi and Web3 evangelists predict needs to provide better security than what we currently see — and a bear market may provide the conditions for developers, community members, and investors to get behind this initiative.
Worthier projects come through
While bear markets can indeed provide difficult conditions for developers, they also reward skill and truly great ideas. This is not just great for the sector in general, but means good developers feel less discouraged that their blockchain development project is not being overshadowed by the latest fad platform and token with no long-term strategy.
As a recent article in beincrypto talks about, it’s not enough for projects to simply hand out tokens or rely on the sugar hit that comes with a staking initiative. A project needs to show it is sufficiently robust and has strong prospectives to stop investors from abandoning the project or providing funds only on a very temporary basis in an effort to gain quick profits.
Bear markets allow us to better see gamechanging projects that have the fundamentals to make a positive future for the industry. Remember, it was the last bear market that gave us Uniswap, Polkadot, BNB Chain, and Chainlink.
Community strength shines through
While it’s easy to get friends when things are going well, when times are tough, you see who your real supporters are. In a bear market, people are able to go deeper, educating themselves and being part of a community where everyone believes in the success of a project.
We’ve frequently pointed out the strength and value of the NEAR community in supporting us through engagement with the project we are involved in, PembRock Finance, which is built on the NEAR blockchain. Not only have they helped to raise awareness of the project, but they have also given constructive feedback in relation to the design and at the testing stages. When there is less investment going around, it is communities that help worthwhile projects get noticed.
Less encouragement of risky investing
Due to the fact that mainstream media is generally older and more conservative in its thinking, there is no shortage of articles claiming that blockchain has no uses and that the entire industry is built solely on hype; however, they can never resist a juicy story when cryptocurrency movement is on the up. At that time, we see breathless reporting about a working-class mum quitting their job to trade crypto or someone striking it big on a long-shot meme coin. While making for a catchy headline, this kind of reporting only serves to encourage people to dive into random projects without much research or risk management, leading in many cases to losses or being taken in by the aforementioned crypto scams. Thankfully in a cryptocurrency bear market, we see much less of these stories.
Blockchain innovation is ongoing
In sum, we can iterate that advances made by builders during bear markets serves as the catalyst for bull markets when the time is right. Many big companies that can afford to play a longer game are still betting big on DeFi and Web3 as the future of the Internet and entertainment. Here are just a few examples:
- Meta (formerly Facebook) are trialling the ability for creators and collectors to showcase NFTs on Instagram.
- Budweiser moves into blockchain gaming through sponsorship of the Ethereum-based NFT horse racing game, Zed Run.
- While Bitcoin and Ethereum are currently seeing outflows, Web3 projects such as NFTPort (NFT infrastructure for developers — $26 million in series A fundraising) and Molecule (medical platform linking research and funding — $12.7 million in seed funding) are garnering big investment.
While this market downturn may have (temporarily) shifted investment to different areas, it is clear that there is still a lot of faith in a sector that has gone past theoretical promises and is starting to deliver real, working systems. While still focused primarily on entertainment at this point, DeFi and Web3 projects are starting to address things like culture, the environment, and artificial intelligence.
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