Crypto Winter Clears the Market, Reinforces Industry Trends
Old models become obsolete, while new trends emerge. Crypto projects change their mode of operation, cut one expenses and increase another ones. ChangeNOW asked experts from different domains of the crypto industry about how the crypto winter will affect the market, what new trends should emerge, and how we can benefit from the situation.
The Crypto Winter Is Upon Us
Bitcoin has lost about 70% of value since its $69,000 peak last November. The same applies to the entire crypto market whose total capitalization dropped from $3 trillion at the end of 2021 to today’s $1T. This May, things got worse when Terra collapsed, sparking a massive liquidity crisis. Celsius Network, Three Arrows Capital, and many other crypto platforms and lending services went bust.
There’s an opinion that this crypto winter is “warm” – it wipes out speculators who needed no more than quick gains, as well as platforms that sacrificed the security of users’ funds for the sake of profit. Bigger players such as Binance and FTX have remained intact – moreover, they are hiring new team members and creating new products. But how “warm” is the current crypto winter, actually?
The Panel
The experts who took part in the discussion are Cassio Gusson, Editor-in-Chief at CoinTelegraph Brazil, Omar Hamwi, co-founder of the Lunar Leap end-to-end crypto consulting and development company, executives from Cryptopay: Alexey Sidorov, CFO, Alex Lebedev, Customer Experience Product Owner, Konstantin Gorin, Head of Support; and Mike Ermolaev, Head of PR at ChangeNOW.
Market Trends in the Crypto Winter
The recent dramatic market fall and the subsequent investors’ low sentiment are referred to by crypto enthusiasts as “crypto winter”. How is it going to influence the existing trends in the crypto industry? What trends will take over the industry in a year or two?
Cassio Gusson: The cryptocurrency market goes through bullish and bearish cycles. What we're seeing now is nothing new, it's just another market cycle. However, now Bitcoin is no longer a promise, it is an investment product with ETFs, investment funds and several other institutional products. This shows that, unlike in the 2017 cycle, we now have a mega investment industry with exposure to BTC and no longer just retail investors, whales and miners. Bitcoin is no longer a “geek thing”, it is a global investment product. That said, the trend for the next few years is for more and more institutional investors to store money in Bitcoin, this will not stop, it will only grow.
Another trend is the approval of a spot Bitcoin ETF, likely along with the regulation of crypto assets in the U.S. Regulation will also be a trend for the next few years around the world. This will make cryptocurrencies grow even more as financial assets and, of course, increase their value. But to paraphrase the creator of Cardano, the crypto universe will have to decide if it wants a to-the-moon with governments dictating the rules, or if we are willing to “have control of ourselves” but with the possibility of the value of crypto assets falling by 90%...
And finally, another trend is metaverse and much innovation in Ethereum and in layer-2 solutions such as Matic, Solana, and a network that is still in the testing phase called Jaz Chain.
Omar Hamwi: Companies will reduce their staff, especially on the business side, and increase development. During the bull market, the growth outlook of new projects, new parachains, and fundraising seemed promising. In this market, however, many of these gains have been lost. It will be harder to raise investments, remain profitable, and maintain growth in this environment. This will limit the number of new projects entering the fray and reduce the projects that have not been developing.
On the DeFi side, rewards will likely reduce across multiple platforms. Emerging from this crypto winter, we will likely see more project CFOs implement more creative hedging strategies to their budgets in preparation for the next winter. Most companies seemingly forgot or ignored the short cycles in Web3 in favor of positioning themselves for a long-term bull market. This has resulted in massive hits to these companies and countless layoffs.
Additionally, regulations will likely be put in place that will have additional impacts to the industry. Resulting in less volatility, lower earnings, but more security.
Mike Ermolaev: A crypto winter is a natural market cycle and basically a stress test for crypto companies, assets, and investors. It is evident from how the recent capitulation has brought in new optimistic players into the market. As you can see, the recent collapse of some crypto companies was not a catastrophe. Despite the pain they caused, they didn't ruin the entire industry like many doomsayers predicted. In a competitive environment, weak players with illusory goals will leave, while strong players will stay. Eventually, a new wave of sophisticated projects will emerge. We are already seeing new financial blood being injected into the market, so it will soon be able to breathe easier.
Steady Development or Freeze of Operations?
It can be assumed that the market fall has affected the way companies develop their products. We asked the experts about what impact they see.
Cassio Gusson: The crash of the market does not impact the development of the industry. In fact, it is good for eliminating bad projects and projects that are useless. That's what we saw in May, June, and July, and I believe we will see more. People have to identify the hype, or, as Public Enemy would say, "don't believe the hype"... A thing isn’t good simply because it says it uses blockchain. If it invests in cryptocurrency, that doesn’t mean it's necessarily good either. If it’s an NFT, it’s not automatically good for something... of more than 10,000 cryptocurrencies that exist, there aren't 100 that are really good for something.
Alexey Sidorov: We had to re-assess our product development plans to delay the least predictable and risky features and focus on several areas where we expect the most industry and community interest in the upcoming months. We’ve put our effort into listing the NEAR protocol, and currently, we are exploring its various layer-2 solutions and the USN stablecoin (because we see value in what NEAR ecosystem brings to Web3 adoption).
On the other hand, we focused on the traditional fiat part of our product – cards. The aim is to make them even more flexible and tailored for our customers’ needs, while remaining one of the most powerful cards on the market. Finally, we give more priority to features that will help our customers start recurring investments in crypto during the “summer sale” time.
Konstantin Gorin: The main impact of the market fall that I see is the emotional state of the users. They get nervous and cautious, they don't trust the support the way they did before. It's a challenge that we're happy to accept, but would've been much easier to help the client if they didn't have to double-prove every detail along the way.
Alex Lebedev: Crypto can be used in many ways, but obviously it’s a bit tricky now to promote it as an investment tool. Stacking can be too risky in the current market situation, so we are doing it in a way to ensure the safety of funds in the first place. We still are able to suggest competitive rates with minimal risk. We pay a lot of attention to new technologies, security and, of course, user experience.
Omar Hamwi: Generally, in any recession or market downturn, one sees an uptick of layoffs especially on the business side. Development and product teams, however, are impacted less. This is largely due to product development being a priority in these downturns. Both in Web3 and in banking, one sees an increase of heads down in product development.
As the crypto winter weeds out non-performing projects, those projects with merit or significant funding continue to move forward. In short, you see an evolution of the use cases and products that come out following a downturn. A saying I have been hearing around the industry – “develop in a bear market and launch in a bull market”.
Mike Ermolaev: The market fall shows us who has been swimming naked. In the end, the collapse of fundamentally worthless projects that enticed uninformed retail traders and high-profile investors is a positive development. Projects that want to survive will learn from these mistakes and will build better. It is clear that crypto, Web3, has captured people's imagination, adoption is accelerating, and the wheel that started rolling cannot be stopped. Crypto's creative energy will result in amazing projects, which we will be seeing in the near future.
New Trends and Products
When the “crypto winter” is over, we may see new products and market trends emerge in the industry. What could they be?
Cassio Gusson: The trends we discussed above include the continuing adoption of Bitcoin by institutional investors, the approval of spot Bitcoin ETF, and the rise of metaverses and L2 solutions. Here, I would add soulbound tokens – something that could really be the hype in 2025.
ChangeNOW’s note: Soulbound tokens are non-transferable NFTs that uniquely belong to one individual. They store significant data and allow their owners to publicly prove it. An SBT is like a digital wallet that keeps education certificates and employment history, driver’s license, and membership cards under one roof secured by the blockchain.
Alex Lebedev: It’s not the best thing to make predictions, but I would say that our world is changing a lot now, and crypto is not a “geek” thing anymore. It’s a serious tool that can make daily life better. So I expect that more people will adopt crypto in their everyday needs each month, and blockchain technologies will be used to solve new problems in daily life.
Omar Hamwi: Identity will likely start to take center stage, as well as disruptive applications. More use cases involving the metaverse and NFTs such as real-estate will appear. There will be more ownership through NFTs and Web3 in our day to day life (outside of just art and art-related themes).
Taking Profit from the Crypto Winter
Is it conceivable that ordinary users and crypto investors could benefit from the current market situation? If so, how? If not, what are the possible mitigation strategies?
Cassio Gusson: There are always those who win and those who lose on any market day and cycle. Just look at CoinMarketCap, and you will see that there are coins that go up and coins that go down every day. Investors first need to know what they want in the cryptocurrency market to decide what strategy to take: Do I want to get rich overnight? Do I want to invest for the long term? Do I want to save in cryptocurrencies? I don't want anything, I just want to have fun and live the emotion of the charts?
Anyway, the first thing is to know what you want, and after that things get easier. For example, if you want to save in cryptocurrencies, why worry about the chart going up and down? Your investment is long term, so buy a little every month and diversify your portfolio in the main projects. Now, if you want to get rich overnight, it's no use buying Bitcoin, you have to be a player who takes risks in projects of low capitalization knowing you can either lose it all or hit it hard... So define what you want first, and then strategize.
Konstantin Gorin: The bright side I see here is that the pace has changed. Winter means life gets slower to some decree (it definitely works this way in real life). And it means that people get more time: to learn and to clarify what’s been puzzling, more time to get a better understanding of what strategies to undertake and what they are planning to invest their money in. And that would only benefit the industry, because the smarter everyone is — the better the market evolves.
Omar Hamwi: There are plenty of ways to benefit from this situation. To be clear, this is not investment advice. However, for projects you believe will do well in a future bull market, this is a great time for those with liquidity to invest in them. Additionally, passive income strategies such as staking stablecoins or idle crypto is a great way to continue to earn.
Also, airdrops and rewards continue to exist in a bear market, which can be converted for projects you believe in or can be held onto for a possible growth in value.
Finally, it doesn’t hurt to explore more use cases or get involved within the industry. The supply of professionals in Web3 continues to be low in its early days, therefore giving you a chance to enter this market and become a coveted Web3 expert.
Bottom Line
Crypto winter appears to be a great time to slow down and reassess the plan of action, both for businesses and individuals. It makes cryptocurrency enthusiasts put the safety of investments first and give preference to low-risk strategies (yet still, there are opportunities to earn). But despite the fact that it’s cold outside, the crypto adoption goes on, and new exciting trends are not far off. Stay warm, and take your time to build your best strategy.
