It’s tough to know where the current crypto market is headed. The trouble really fired up with the de-pegging of UST, creating a contagion that forced its way through the Ethereum universe, dragging down values, startling protocols, and playing a hand in the insolvency and subsequent bankruptcy of Celsius, the lending protocol.
The bear market has sunk its claws into the industry, but is it a long-term position? Post-Ethereum Merge, uncertainty remains, but we still hold onto hope and are planning for stabilization in the ecosystem. The only certainty the industry currently has is that we are collectively uncertain. For any individual team, protocol or decentralized autonomous organization (DAO), the “bigger picture” market circumstances are 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 continue building and innovating while prices come back to earth and the fun and games of huge asset values restart. The wise among us will reframe how we view this bear market — what if this isn’t a bear market at all? Instead, what if we think of this as a bull market for innovation?
With that perspective as our North Star, here are five opportunities that this current cycle presents that will contribute to stronger teams, projects and assets in the long run.
- Greater decentralization
Too much power or too much leverage in the hands of founders, investors or whales has been revealed as a weakness in troubled crypto markets. Without regulation and with our historical legal contracting system under-equipped to deal with malfeasance or mistakes, the benefits of decentralized and trustless organizational structures like DAOs become more important.
If done right, DAOs and protocols that provide tools like optimistic treasury management, productivity incentives, and governance will prove to have real value. They can, and will, shape checks and balances moving forward in decentralized finance (DeFi) and other blockchain ecosystems.
The appetite for more decentralization is already growing. One such example is the Tornado Cash sanctions imposed by the U.S. Treasury, which saw the department attempt to prevent alleged illegal activity from taking place in the crypto mixer. This led to further encroachment of decentralization when a series of platforms like Uniswap, Circle, dYdX, Aave and others banned accounts directly and indirectly associated with Tornado Cash.
The silver lining on the horizon is that we’ve seen some positive pushback against this sanction. This includes Coinbase backing a lawsuit against the U.S. Treasury, and Github partially unbanning Tornado Cash and its contributors on the software development platform.
These events showcase just how deep the need is for innovative, strong tools that will help elevate and maintain decentralization.
- Out with the trash
When the crypto tide goes out, that’s when the Ponzi schemers, rug-pullers and fair-weather traders are revealed as the ones swimming without their bathing suits on. Bull markets don’t rely enough on consistent performance, sound tokenomics, honesty and hard work. That’s where the trouble begins.
While the market slump is also taking place in the wider finance and technology markets, crypto projects have not been strangers to cost-cutting exercises. We saw prominent companies, including Coinbase, Open Sea, BlockFi, Crypto.com and Gemini, lay off staff this summer. Budgets like marketing spending are also being pared down in attempts to stay afloat and ride out the market conditions.
Times like these show us who is for real. The strong among us will adapt and survive. A bear market is about resetting, revisiting what is important, and leveraging internal resources to innovate and improve. It’s not a time to sleep and wait.
There is no better time to grow than in the current state of the market.
- More space for good ideas
Bull runs can often encourage shortcuts. When the going is good, protocols and projects tend to cling to bull run fireworks instead of nurturing market fundamentals. Down markets create more space for bright ideas and builders to earn more attention.
The signal-to-noise ratio is better in a bear market. Good ideas are understood better and can be debated with sufficient intensity and clarity.
In these environments, good ideas can properly take root. Solution seekers get to test their mettle when we become less obsessed with rocketship price values amid easily attainable profits. It’s more conducive to building when people are not constantly trying to break things.
In other words, bear crypto markets are when the builders can thrive — and while some of the best people will lose their jobs in the downturn, there will be good places for good people to land on their feet and help to make positive change.
- Mergers and acquisitions
We’ve already seen this playing out. So far in 2022, crypto mergers and acquisitions have matched last year’s totals, despite the price collapse. As of end of June this year, there were 92 deals, setting pace for 184, which would log more overall deals than the bull run market of last year, according to data by Arcane Research.
Lower valuations for cryptocurrencies and companies at this current stage could be catalyzing greater interest in acquisitions.
M&As are an opportunity for smaller projects that may not have survived alone to make it through the bear market while enabling important innovations to be preserved. Deals also help projects remove excess capacity, which helps fuel long-term profits.
Market uncertainty can lead to bold decisions that are survival-focused, which can guide us toward future success. To be sure, there are valid concerns about market consolidation given the industry’s ethos of decentralization, particularly if the acquisitions are led by centralized or Web2 companies. However, times like these can equally promote the coming together of DAOs, projects, and founders to create stronger and more sustainable protocols and ideas.
- Stronger DAOs
Let’s be honest. Many people who were overly leveraged with crypto assets have been hurt. Many DAOs and projects had their treasuries cut in half or worse.
These are tough times for people, and many will be turned off of the crypto space forever.
But for those 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 prepare us for the next bull run.
So let’s set aside the discourse of this being a bear market, because bear markets can be bulls if your focus is innovation.
Clayton Roche is the Costa Rica-based head of community and communications for UMA, an oracle for Web3. Clayton was previously a country ambassador for MakerDAO and a community manager for Mosendo, a DAI wallet. He also started a decentralized finance community called DeFi Nation.