5 Reasons The Crypto Bear Market Is Good For Innovation

It is difficult to know where the current crypto market is heading. The problem really erupted with the de-anchoring of the UST, creating a contagion that worked its way through the Ethereum universe, driving surprising values, protocols, and playing a part in the insolvency and subsequent bankruptcy of Celsius, the loan protocol.

The bear market has sunk its claws into the industry, but is this a long-term position? After the Ethereum merger, uncertainty remains, but we still remain hopeful and expect the ecosystem to stabilize. The only certainty the industry currently has is that we are collectively uncertain. For any individual team, protocol, or decentralized autonomous organization (DAO), the “big picture” of market circumstances is beyond our control.

However, there is something we can control: how we react and behave as builders in a bear market. It’s essential to keep building and innovating as prices return to earth and the fun and games of huge asset values ​​restart. The wiser among us will reframe our view of this bear market – what if it wasn’t a bear market at all? Instead, what if we viewed this as a bull market for innovation?

With that perspective as a North Star, here are five opportunities this current cycle presents that will help strengthen teams, projects, and long-term assets.

  1. Greater decentralization

Too much power or too much leverage in the hands of founders, investors, or whales has proven to be a weakness in struggling crypto markets. Without regulation and with our historical legal contractual system under-equipped to deal with malfeasance or error, the benefits of decentralized, trustless organizational structures like DAOs become greater.

Done right, DAOs and protocols that provide tools like optimistic cash management, productivity incentives, and governance will prove to have real value. They can, and will, shape the checks and balances going forward in decentralized finance (DeFi) and other blockchain ecosystems.

The appetite for more decentralization is already growing. One such example is the Cash Tornado Penalties imposed by the US Treasury, which saw the department attempt to prevent alleged illegal activities from occurring in the crypto mixer. This led to further encroachment of decentralization when a series of platforms such as Uniswap, Circle, dYdX, Aave and other prohibited accounts directly and indirectly associated with Tornado Cash.

The silver lining on the horizon is that we have seen a positive reaction against this sanction. This includes Coinbase support a lawsuit against the US Treasury, and Github partially unbanning Tornado Cash and its contributors on the software development platform.

These events show how necessary it is to have innovative and solid tools that will help to elevate and maintain decentralization.

  1. Out with the trash cans

When the crypto tide goes out, that’s when the Ponzi schemers, rug pullers, and fair weather traders turn out to be the ones swimming around without their bathing suits. Bull markets don’t rely enough on consistent performance, strong tokenomics, honesty, and hard work. This is where the trouble begins.

While the market meltdown is also happening in the broader financial and tech markets, crypto projects have been no strangers to cost-cutting exercises. We’ve seen top companies including Coinbase, Open Sea, BlockFi, Crypto.com and Gemini lay off staff this summer. Budgets such as marketing expenses are also reduced in an attempt to stay afloat and weather market conditions.

Moments like these show us who is for real. The strongest among us will adapt and survive. A bear market is about resetting, reviewing what is important, and leveraging internal resources to innovate and improve. Now is not the time to sleep and wait.

There is no better time to grow than in the current state of the market.

  1. More space for good ideas

Bullfights can often encourage shortcuts. When all is well, protocols and drafts tend to hold on to bullish fireworks instead of feeding market fundamentals. Falling markets create more space for bright ideas and builders attract more attention.

The signal to noise ratio is better in a bearish market. Good ideas are better understood and can be debated with sufficient intensity and clarity.

In these environments, good ideas can take root. Solution seekers can test their mettle when we become less obsessed with rocket prices amid easily achievable profits. It’s more conducive to building when people aren’t constantly trying to break things.

In other words, crypto bear markets are when builders can thrive – and while some of the best people will lose their jobs during the recession, there will be good places for the right people to land on their feet and help bring about positive change.

  1. Mergers and Acquisitions

We have seen this play out before. So far in 2022, crypto mergers and acquisitions matched last year’s totals, despite the collapse in prices. At the end of June this year, there were 92 trades, setting the pace at 184, which would see more trades overall than last year’s bull market, according to data from Arcane Research.

Lower valuations for cryptocurrencies and companies at this current stage could catalyze greater interest in acquisitions.

M&As are an opportunity for smaller projects that might not have survived through the bear market on their own while allowing important innovations to be preserved. The agreements also help projects eliminate excess capacity, which helps fuel long-term profits.

Market uncertainty can lead to bold, survival-oriented decisions that can guide us to future success. To be sure, there are valid concerns about market consolidation given the decentralization philosophy of the industry, particularly if acquisitions are led by centralized or Web2 companies. However, times like these can also foster DAOs, projects, and founders coming together to create stronger, more enduring protocols and ideas.

  1. Stronger DAOs

Let’s be honest. Many people who were over-exploited with crypto assets were harmed. Many DAOs and projects have seen their cash flow cut in half or worse.

These are tough times for people, and many will be forever extinguished in the crypto space.

But for the founders, crypto workers, and DAOs who stick with it, they will come out the other side stronger than before, now armed with new solutions, tools, and ideas that will help shape and shape us. prepare for the next bull run.

So let’s leave the talk of it being a bear market aside, because bear markets can be bullish if you focus on innovation.

About Matthew Berkey

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