5 Reasons Why the Crypto Bear Market Is Good for Innovation

It is difficult to know where the current crypto market is headed. The problem really started with the decoupling of UST, creating a contagion that forced its way through the Ethereum universe, dragging down values, sensational protocols and playing a hand in the insolvency and subsequent bankruptcy of Celsius, the lending protocol.

The bear market has put its claws into the industry, but is it a long-term position? Post-Ethereum Merger, Uncertainty Remains But We Still Hold On To Hope And Plan For Ecosystem Stabilization. The only security the industry has today is that we are collectively insecure. For any individual team, protocol, or decentralized autonomous organization (DAO), market circumstances are the “bigger picture” beyond our control.

However, there is something we can control: how we react and behave as builders in a bear market. It’s important to keep building and innovating as prices come back down to Earth and the fun and games of huge values ​​start anew. 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 this current cycle presents that will contribute to stronger teams, projects and assets in the long run.

1. Greater decentralization

Too much power or too much influence in the hands of entrepreneurs, investors or whales has been exposed as a weakness in troubled crypto markets. Without regulation and with our historic legal contract system underequipped to deal with wrongdoing or failure, the benefits of decentralized and trustless organizational structures like DAOs become more important.

If done right, DAOs and protocols that provide tools like optimistic financial management, productivity incentives and governance will prove to have real value. They can, and will, shape the checks and balances going 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 US Treasury Department, which saw the department attempt to prevent alleged illegal activity from taking place in the cryptomixer. This led to further encroachments on decentralization as a number of platforms such as Uniswap, Circle, dYdX, Aave and others banned accounts directly and indirectly linked to Tornado Cash.

The silver lining on the horizon is that we have seen some positive backlash against this sanction. This includes Coinbase supporting a lawsuit against the US Treasury Department and Github partially lifting its ban on Tornado Cash and its contributors to the software development platform.

These events show how deep the need is for innovative, strong tools that will help to raise and maintain decentralization.

2. Out with the trash

When the crypto wave goes out, that’s when Ponzi scammers, carpet pullers and fair-weather traders are exposed as those who swim without their bathing suits on. Bull markets do not rely enough on consistent performance, good tokenomics, honesty and hard work. That’s where the trouble begins.

While the market downturn is also taking place in the broader financial and technology markets, crypto projects have been no strangers to cost-cutting exercises. We saw prominent companies including Coinbase, Open Sea, BlockFi, Crypto.com and Gemini lay off staff this summer. Budgets such as marketing expenses are also reduced in an attempt to stay afloat and escape market conditions.

Times like these show us who is real. The strong among us will adapt and survive. A bear market is about resetting, revising what’s important, and leveraging internal resources to innovate and improve. There is no time to sleep and wait.

There is no better time to grow than in the current state of the market.

3. More space for good ideas

Bull runs can often encourage shortcuts. When things are going well, protocols and projects tend to cling to bull fireworks instead of taking care of the market fundamentals. Down markets create more space for bright ideas and builders to get more attention.

The signal-to-noise ratio is better in a bear market. Good ideas are better understood and can be discussed with sufficient intensity and clarity.

In these environments, good ideas can properly take root. Solution seekers get to test their ability when we become less obsessed with rocket prices among easily attainable profits. It’s more suitable for building when people aren’t constantly trying to destroy things.

In other words, bear crypto markets are when developers can thrive – and while some of the best people will lose their jobs during the downturn, there will be good places for good people to land on their feet and help make positive changes.

4. Mergers and acquisitions

We have already seen this play out. So far in 2022, crypto mergers and acquisitions have matched last year’s totals, despite the price collapse. By the end of June this year, there were 92 deals, setting the pace for 184, which would log more total deals than the market’s bull run last year, according to data from Arcane Research.

Lower valuations for cryptocurrencies and companies at this current stage could catalyze greater interest in acquisitions.

M&As are an opportunity for smaller projects that may not have survived on their own to make it through the bear market, while important innovations can be preserved. Contracts also help projects remove excess capacity, which contributes to long-term profits.

Market uncertainty can lead to bold, survival-focused decisions that can lead us towards future success. To be sure, there are valid concerns about market consolidation given the industry’s ethos of decentralization, especially if the acquisitions are led by centralized or Web2 companies. But times like these can just as well foster the coming together of DAOs, projects and founders to create stronger and more sustainable protocols and ideas.

5. Stronger DAOs

Let’s be honest. Many people who were overly leveraged with crypto assets have been hurt. Many DAOs and projects had their coffers halved or worse.

These are tough times for people and many will be turned off the crypto space forever.

But for those founders, cryptoworkers 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 put aside the discourse that this is a bear market, because bear markets can be bulls if the focus is innovation.