By the end of May, the price of Bitcoin (BTC) had dropped 40%, Ether (ETH) had lost 50% of its value, and the entire cryptocurrency market dipped below its $1 trillion cap. first time since January 2021. As we enter a clear bear market trend, it is essential to focus on what the blockchain industry has always suggested: build.
The fall of Bitcoin, Ether and the cryptocurrency market in general correlates with macroeconomic uncertainty. The uncertainty is fueled by rising interest rates coupled with quantitative tightening, causing assets to sell off on the stock and cryptocurrency market. It is very possible that we could see a repeat of events such as the decommissioning of the Terra ecosystem, the fall of the Celsius cryptocurrency lending service, and the $400 million liquidation losses of the hedge fund Three Arrows Capital..
The market crash of 2022 compared to the crypto winter of 2018
The crypto winter of 2018 was triggered by negative market sentiment and loss of confidence; nevertheless, crypto winter 2022 is a direct result of macroeconomics. Decentralized finance (DeFi) is down, stocks are down, and global markets are down. This bear market is not focused on cryptos alone, as deleveraging is happening simultaneously in several markets.
Venture capitalists and private investors poured $30 billion into blockchain projects. A third of that amount went to game projects and virtual worlds to lay the foundation for the Web3 metaverse.
As we see an exodus of talent from Web2 projects, we also anticipate further growth from Web3 brands, with several brands such as Yuga Labs, The Sandbox and RTFKT already partnering with retail giants, such as Adidas, Nike, HSBC, Warner Bros and others. Decentralized applications (DApps) powered by blockchain and DeFi have the potential to lead the evolution of Web3 in the future and wrest control from a handful of centralized gatekeepers..
This indicates that the transition to Web3 is imminent and depends on a catalyst to proliferate. A crypto winter can certainly be seen as a major catalyst as it allows Web3 projects some downtime where they can focus on scalability and sustainability.
Crypto winter is not a time to hibernate, but to continue building
During the crypto winter of 2018, we saw a notable rise in various disruptive projects, such as OpenSea and Uniswap. Despite the downward trend, projects leading the blockchain space have committed to building and improving their products..
These projects took years to succeed. In 2021, OpenSea generated $20 billion in non-fungible token (NFT) sales while Uniswap adoption grew significantly, showing the potential of a decentralized financial system. Other examples in DApps, DeFi, NFTs, and Web3 games abound.
The key to expanding the Web3 community is usefulness
During the current crypto winter, more venture capital is likely to be available to fund new projects, so they can not only survive, but thrive during the next big wave. Y that is the key to survival: utility. Projects that offer utility are successfulwhile those that are fundamentally flawed, exaggerated and useless end up failing. A crypto winter therefore separates the proverbial wheat from the chaff..
One of the best ways for crypto projects, whether DeFi, GameFi or NFT related, to go from Web2 to Web3 is consider the implication of on-chain hosting processes. Not only that, but it is essential to accelerate business growth by reducing costs. Payment gateways that charge inflated fees should be the first to be examined, and it certainly makes sense to consider a viable approach to the intrinsic practice of making a profit.
Crypto payment solutions that allow crypto in and out are helping Web3 companies accelerate their businesssince the solution allows lTransactions are made off-chain, which makes the fees involved much cheaper than standard payment methods. That also makes it easy to improve conversions and revenue by allowing a project’s users to buy and sell cryptocurrencies at competitive prices within the project’s platform. Cryptocurrency platforms looking to streamline their payment infrastructure should consider fully integrated input and output options..
The demand for API solutions such as I/O platforms is constantly growing because they help businesses to settle different forex and cryptocurrency transactions., reducing counterparty risk and costs, which empowers companies and their users. Such platforms also offer price transparency with leading exchange rates with low conversion spreads, so users know what they are paying and what they are paying for.
In this approaching winter, this is the kind of opportunity we should be looking for: projects that are innovative and scalable infrastructures that drive the next evolution of the digital asset ecosystem. As always, the key to knowing when to be greedy when others are fearful, and fearful when others are greedy is not as simple as it seems, but enterprise platforms built on solid foundations remain reliable over the long term and have built-in resilience that will see them through the good times and the bad, like the crypto winter we are experiencing.
This article does not contain investment advice or recommendations. All investing and trading involves risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Raymond Hsu He is the co-founder and CEO of Cabital, a cryptocurrency wealth management platform. Prior to co-founding Cabital in 2020, Raymond worked for fintech and traditional banking institutions including Citibank, Standard Chartered, eBay, and Airwallex.
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