Web3 companies on how to bounce back from crypto winter

Let’s face it: if crypto winter has a temperature, it could plunge past freezing.

As countless NFT communities continue to build and work to add value to their projects, they do so against a backdrop of harsh realities that are just too big to ignore.

In July, OpenSea announced that it was laying off 20 percent of its employees to limit the winter’s future effects. A month before, Coinbase announced a hiring freeze that would last “for the foreseeable future” and rescinded several accepted job offers. Other exchanges, such as Gemini, have also announced layoffs in recent weeks. Web3-wide, the name of the game now is pretty much contraction and preservation.

But cryptos and NFTs don’t exist in a bubble, making it difficult for any of them to thrive when macroeconomic and geopolitical tumult is rocking the globe. US inflation alone breached the highest level in four decades before easing to 8.5 percent in July. The Federal Reserve System warned earlier this year that the global economic effects of Russia’s invasion of Ukraine were likely to “reduce GDP and significantly increase inflation.”

But neither excessive doom and gloom nor groundless optimism will be of much help to anyone rooting for the swift end of the bear market. Taking the honest temperature of the ecosystem can only help Web3 communities build out of these difficult circumstances.

So, how do some of the biggest companies in the NFT space view the crypto winter and the steps they are taking to adapt and thrive in it? First, it’s not their first winter rodeo. But it begs the question: should companies now forced to take drastic measures to stop the bleeding have been more prepared for the bear market?

A crypto winter like no other

“I think the current crypto winter was inevitable,” Art Block CEO and founder Erick Calderon explained in an email exchange with nft now. “It’s not always a startup’s fault when things don’t go as planned, but we as a company go above and beyond to protect our business and our team. I saw the industry collapse in 2017 and 2018 and committed to doing everything in my power to help protect art blocks from these harmful crypto cycles.”

While Web3 is no stranger to cycles, it’s crucial to note that the one-two punch of a crypto winter combined with a potential worldwide recession exacerbates difficulties for everyone.

But OpenSea seems to believe that long-term planning is key. IN a company memo to employees CEO Devin Finzer announced recent layoffs that the market has “entered an unprecedented combination of crypto winter and broad macroeconomic instability, and we must prepare the company for the possibility of a prolonged downturn.”

An OpenSea spokesperson spoke to nft now via email, elaborating on these comments and offering a more hopeful perspective on the situation.

“We’ve been through the winter before,” the spokesperson said. “OpenSea was built with the cyclical nature of crypto in mind. Both users and newcomers to the space are all looking for trusted, reliable and secure portals to engage in the Web3 world, so we’re doubling down on trust, security and reliability, improving the user experience for collectors alike and creators.”

It’s an optimistic position the company has no luxury to avoid taking at this point, and certainly one the NFT giant hopes will reinforce confidence in its stability and longevity following the news.

Slow and steady wins the Web3 race

Some Web3 companies have taken a different approach to navigating the crypto winter. Magic Eden, for example, has so far avoided layoffs and even recently announced that it is adding multi-chain support for Ethereum and Solana to its platform, a significant addition made all the more impressive by its timing. The key to navigating these winters, the company believes, is simply to play the long game.

“The markets will do what the markets do,” Magic Eden COO Zhuoxun Yin said in an email exchange with nft now. “We know how these markets can move and are keeping our heads down to build on a time horizon [of more than ten years]. Our co-founders have survived a number of crypto bear markets, and that collective experience has informed how we’ve prepared for this current market downturn.”

The biggest lesson the market has taken from the past six months in the space, Yin said, is not to take growth or relationships in the community for granted. “We are carefully managing our marketing efforts and headcount to continue to manage costs,” Yin elaborated.

Both the Art Blocks and Magic Eden teams caution against falling too quickly in love with new revenue mechanisms and attractive “number go up” toys that can shoot off into space and burn out just as quickly. Regarding Magic Eden’s recent ETH post, for example, the company says it spent a lot of time listening to community feedback and identifying user needs before developing and meaningfully investing in the project.

And this brings Web3 companies full circle: when overwhelming obstacles appear, it’s important to remember the basics. Based on this understanding, Erick Calderon and the Art Blocks team believe that the best way to weather the crypto winter is to double down on the mission they dedicated themselves to in the first place.

“There have been so many opportunities to chase after shiny things, the space always has a new mechanic to use or monetize,” explained Calderon. “But we’ve stuck to our original vision and intent, to host the best art from the best artists and make owning art for art’s sake the primary reason people participate on our platform.”

OpenSea, Magic Eden and Art Blocks all share one sentiment: that the last six months have separated the wheat from the chaff in terms of who is truly dedicated to the Web3 space. “At a high level, we believe that in the absence of a hype cycle, the bar for success is higher, meaning that only the best projects, products and ideas flourish,” the OpenSea spokesperson explained.

Calderon also believes a lack of hype in the NFT space helps remove distractions. The most profitable participants, he said, are leaving the space to chase the next opportunity for a financial windfall. Once they leave the square, everyone else can participate in their communities for more “purist” reasons. This in turn fosters more meaningful conversations and developments that are likely to benefit everyone in the ecosystem.

Several people in Web3 have advised everyone to think of the bear market as the “building market” and encouraged innovation in the crypto and NFT communities. While this may feel like a cliché point, it is still the best stance the NFT space can take to break through the bottleneck.

Another necessary step is to confront the hype within and learn to focus on the essential successes of Web3. Consider: Fungible token markets have become a trillion-dollar industry over the past few years, despite many ups and downs. NFTs have the potential to do the same, but to get there, project developers need to do more than rely on star-crossed infatuation with the technology. Something becoming an NFT is no longer enough – variety in use cases will lead the way forward.

“What’s going to create the next era of adoption are collections that can pique people’s curiosity, not because they’re just an NFT, but because the value that NFT represents is something so powerful that [it] entices new user acquisitions – whether it’s token-gated content, access (eg ticketing), community-based projects or artistic value,” Magic Eden CEO Jack Lu said in an email correspondence with nft now. “When the dust settles for the bear market, we will see more high-quality projects and interesting use cases of NFTs drive the adoption of NFTs.”