Path for Crypto Winter Development – 2018 Once Again?
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In June, the crypto market capitalization fell below $1 trillion for the first time since January 2021. The collapse of Terra left behind the largest loss of wealth in recent history, with both private and institutional investors losing over $60 billion in funds and undermining overall confidence in the market.
We can see that the new crypto winter is at its peak. And many market players are trying to draw parallels with the events of 2018, using the last winter to try to predict when the current one might end. But personally, I think this crypto winter will be very different from the last one, for several reasons.
Why Will Crypto Winter 2022 Be Different From 2018?
It must be pointed out that the situation in 2022 is nowhere near the same as in 2018. When the last crypto winter started, the industry was just starting to strengthen its presence on the global stage and most people around the world had no idea what Bitcoin , blockchain and the rest of these terms meant. The novelty of this market led to a massive increase in interest, which in turn took the form of the ICO (initial coin offering) boom.
The crypto industry was undergoing its first major expansion stage, with many startups taking advantage of using cryptocurrencies as a way to raise money. That resulted in a huge bull run, culminating in Bitcoin’s price hitting the $20,000 mark in December 2017.
However, this ICO explosion ended up ruining things for the entire crypto industry. As mentioned earlier, at that time many who were in the crypto industry had just entered it, but they still did not understand how things worked.
Bad players in the market took advantage of this ignorance and started using ICOs to raise money from gullible investors for projects that looked pretty but had nothing to say in terms of actual solutions and technology behind them.
A huge number of scams and failed projects created a sense of uncertainty, as everyone started calling the entire crypto industry a scam, viewing every single aspect of it in a negative light. While understandable, this view of the crypto world was extremely damaging when prices began to crash. People began to leave the industry altogether, leading to an extremely harsh crypto winter in 2018.
How is the industry doing today?
It took a long time for the industry to recover from the consequences of these events out to recover, it did. It has been four years since 2018, and the situation today is significantly different. The crypto industry is no longer an unknown beast that can turn on anyone in an instant.
Blockchain and crypto have become a massive ecosystem that has the eyes of major mainstream companies, venture funds and even entire governments. The world at large is taking this market much more seriously now, and there is an ongoing effort to not only provide appropriate regulation for this industry, but also to integrate it into the global financial scene.
The profile of investors in this sector has also undergone significant change, growing from what were largely retail players to institutions with significant financial power behind them. In 2020 and 2021, many venture funds began to actively enter the crypto sector, adding digital coins to their portfolios and bringing large amounts of money to the industry.
Just to name a few examples, there is the American venture capital firm Sequoia Capital, which announced its decision to dedicate $500-$600 million of its funds to investments in blockchain and crypto projects in early 2022.
Following the same trend, Andreessen Horowitz established a $4.5 billion fund a couple of months ago, focused on investing in crypto and Web 3.0 opportunities.
Then we also have Microstrategy, which continues to buy Bitcoin even in the midst of the current market turmoil. In late June, Michael Saylor announced the acquisition of BTC for $10 million more.
It is safe to say that many other traditional venture funds and non-crypto companies will likely choose to follow similar paths going forward.
Conclusion
Overall, the crypto sector has become much stronger, thanks to a large flow of investments and the arrival of major market players who are not willing to give up on the opportunities that cryptocurrencies and related technologies can offer them. Bitcoin has a lot more trust and trades at much higher levels than four or five years ago.
So, even if the market has to face another crypto winter, it can certainly do better than it had in 2018. In fact, it may even be possible that what we call ‘crypto winter’ is nothing more than a natural phenomenon of the crypto market. One where the general mood and excessive buzz around overvalued projects is balanced out by a temporary slowdown so that the market can become more mature.
Valentina Drofa is the founder and CEO of Drofa Comms, an international finance and fintech PR consultancy. Drofa is among the 64 best women in startups, according to TechRound.
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