Crypto Winter Has No End In Sight

It’s been two weeks since the latest cryptocurrency/blockchain conference in New York, where the mood was “as usual” for crypto – the future is ours. Just keep calm “hodl” on. But roughly seven business days after the Messari Mainnet Conference in Manhattan, cryptocurrency investments still stink. Ethereum
ETH
, whose investors had hoped that “the merge” would help their investment turn the corner, is down over 65% year-to-date. Perhaps the good news is that since the New York conference, both ETH and bitcoin are beating the Dow. Given the dour market, it’s nothing to write home about.

David Morris, who attended the conference last month as both guest and moderator, called this the “most important crypto bear market in history.”

“The trap for many crypto projects is that while the big, easy returns come from whales and (day traders), those users are also hyper-agile ‘rotator capital,’ willing and able to pull up stakes and move their entire net worth to a new system for a few extra basis points of APR,” Morris says.

Some industry leaders were excited about “regulation” – which seems anathema to crypto. Granted, the serious cryptocurrency/blockchain developers want regulation insofar as it lends their segment of the tech world some credibility. Regulation means ‘you can trust us, we’re not doing scam coin projects.’

So when Binance CEO Changpeng Zhao, known as “CZ” in the crypto world, told Mainnet gatherers that governments are making “positive progress” toward regulation, one understands it to mean that investors can trust Binance – they welcome the scrutiny.

The thing is, CZ and the like have so much money in bitcoin from the early 2020s (remember, BTC was under $10,000 before Covid panic set it) that they can cash out some of those losses and throw lavish parties to hobnob with the A-list blockchain bloggers, egghead coders, and a few venture capitalists for whom the yacht rock music is really playing in the Hudson River. They’re upbeat because they’re still loaded. Most of the crypto day traders and “hodlers” (a typo that’s become a real word in the crypto universe – it means hold) have been crushed. I know I have. I’ve lost the equivalent of a middle-class salary (though I have no sold, so I’m a hopeful hodler).

There are people like that, and there are people like CZ.

What’s in this market for the retail trader at this point? Bitcoin’s
BTC
down. Should we be buyers? Or, as they say on Wall Street, never try to catch a falling knife.

Úrsula O’Kuinghttons, director of communications and partnerships at Web3 Foundation and Polkadot
DOT
, is not scared. She was in attendance.

“The crypto market has plummeted, but it will survive,” she says. “We are definitely at a turning point, where new players in the ecosystem arrive with greater knowledge of the market. At Messari, I saw many relevant players in the industry are increasingly aware that if we want to grow, we need to reach the masses. While the builders will continue to develop blockchain technology, regardless of the histrionics of the market.”

Like in the initial coin offering days of old, there was a lot of talk about new projects coming up, even more than there were in the last down cycle – which was the death of the ICO cycle. And in that happy hour chatter, there is enthusiasm and hope because, what else do you have? Either cryptocurrency is going to become a thing for the masses to maintain a decentralized, uncensored, transactional existence in cyberspace, or it becomes a thing for the Sheldon Coopers (Big Bang Theory character) and The Gamblers of the world – whether from Seoul or San Francisco; a story of sci-fi tech dorks playing with math and algorithms, and new-world casino wizards betting on tokens like $5 chips at a Bally’s casino.

“A favorite saying among the cryptorati is bear markets are for builders and the vibe at Messari echoed that,” says Jeremy Epstein, chief marketing officer at Radix, a smart-contracting platforming tool for developers of decentralized finance applications.

“They know crypto will win. Companies and people are investing in this generational opportunity,” Epstein says.

Some notable takeaways at Messari include uncertainty surrounding the regulatory frameworks and an amicable agreement that the current Ethereum Virtual Machine-based paradigm for DeFi will not scale to anywhere near the levels required to make it work anytime soon. All told, people who attended believe cryptocurrency is not dead and DeFi is the play (sorry, NFT Ape Yacht Club guys).

Moreover, from the tech side, the current crop of Layer 1 smart contract platforms are losing adherents and faith.

“The sentiment at Mainnet was positive,” says Greg Hemmer, head of ecosystem at Shardeum, a new smart contracting platform that went live in 2022. Shardeum is based in Zug, Switzerland. “You still have plenty of entrepreneurs, executives and investors who believe decentralization benefits society. The web3 developers…their vision for turning this into reality is evident,” he says, adding that the conference motivated to build real-world use cases for decentralization.

This is what cryptocurrency investments are still lacking. So many investors own coins and do not use them other than as investment ticker they bought on Coinbase.

The Messari Mainnet conference happens once a year. It first launched in 2018. Messari is the name of the company founded by Ryan Selkis in New York City. Selkis was on the founding teams of Digital Currency Group, where he managed the firm’s seed investing activity, and CoinDesk, where he led the company’s popular Consensus conference. Messari has investments from venture capital firms tied to cryptocurrency exchange giants Coinbase, Gemini and Kraken, as well as well-known blockchain investors like SparkLabs Global Ventures and Blockchain Capital.

“Everyone is looking for the catalyst for the next bull run,” says Epstein, weeks after leaving the conference. “Everyone believes a bull run will return…eventually,” says Epstein.

For now, the crypto winter has no end in sight. Doom and gloom in markets won’t help. But crypto investors have been here before. If the Messari attendees are correct, the patient investor will be rewarded. Next year? When traditional securities investment sentiment returns, it will also return for beat-up cryptocurrency.

*The writer owns Bitcoin, Polkadot and many other cryptocurrencies not mentioned in this article.