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This year has been a tumultuous year for the cryptocurrency market, with prices falling in line with asset prices plummeting.
A combination of runaway inflation and political pressure eventually forced the Fed to turn hawkish, with rising interest rates lowering earnings expectations and pulling the stock market down.
Of course, wherever the stock market has been so far, the cryptocurrency market has followed, but only with more volatility. And that’s exactly what we’ve seen so far this year.
However, it is important to note that price monitoring is even more important in this industry. Sure, a lot of people get into the crypto space to speculate and get rich quickly, but it’s the same nascent industry that cryptocurrency has ever grown to on the scale it had in its youth. Even though Satoshi Nakamoto’s whitepaper on Bitcoin was published only 14 years ago, it’s enough to look at crypto’s past bear markets.
The latest was 2018/2019 and the market was equally dire. Many projects have failed, but the resilience has remained and more have started.
I recently came across this Lecture and interview by Richard K. LyonsAs Chief Innovation and Entrepreneurship Officer at the University of California, Berkeley, he is perhaps best placed to comment on what the younger generation’s eyes are on.
The fascinating part of the interview, and very relevant now, is that it took place in April 2018, in the middle of the last bear market.
With prices declining as they do now, Lyons appeared unfazed, saying, “There are companies that are inviting undergraduates to talk about blockchain…these young people are , is much closer to this than any of us.” .
Of course he was right. Blockchain is just getting started.
Just two years later, decentralized finance exploded. This is a gigantic vision aimed at how traditional finance is funneled through centralized institutions. The innovation didn’t stop there. NFTs have penetrated the mainstream, opening up possibilities for artists, collectors, and creators to own and monetize their intellectual property.
The above are just two examples of rapid growth in 2020/21, laid the groundwork during the dormant period of 2018/2019.
So while it’s true that there were a lot of bubbles around the space (that includes NFTs sold for dizzying amounts based on the Greater Fool Theory), this is a bull market. Although nothing more than a hysteria of the market, the natural periodicity of the market means that this is a natural and recurring pattern throughout history.
To put it a little more eloquently, the following tweet from Cardano founder Charles Hoskinson sums up the bear market nicely. In such an abominable macro environment, the prices of risky assets like cryptocurrencies always fall regardless of their fundamentals.
Yes, it’s called a bear market. That’s what happens. Nothing changes that. No announcement makes a difference. Cardano cures cancer, gives her a 10-inch penis, gives her a robot that plays personal poker that takes grandma to church on the weekends.
Charles Hoskinson (@IOHK_Charles) May 9, 2022
The market humbles everything and washes away the excess. But the proponents are here to stay, the foundations of blockchain technology are still solid, and the foundations of this industry are in a much better place than in previous cycles.
One thing to consider, however, is that this is the first crypto winter to occur in conjunction with a broader economic bear market. So, despite all of the above, it’s almost unprecedented.
But as the technology advances and the industry picks itself up, there’s still plenty of optimism despite the damning price action.
