Blockchain technology has big plans, despite the carnage in the markets
This year has been a turbulent year in the crypto markets, with prices falling in line with the plunge in asset prices across the board.
A combination of runaway inflation and political pressure has forced the Fed to finally turn hawkish, with rising interest rates deflating earnings expectations and dragging down the stock market.
Of course, wherever the stock market has been to date, the crypto markets have followed suit – only with more volatility. And that’s exactly what we’ve seen so far this year too.
It’s about more than the price
However, it is important to note that there is more to pricing in this industry. Sure, many people join the crypto space to speculate and get rich quick, but that’s the same as any new industry that has had an expansion on the scale that crypto has so far in its youth. We need only look to past bear markets in crypto – of which there have been many despite Satoshi Nakamoto’s Bitcoin Whitepaper being published just 14 years ago.
The last was 2018/2019, when the markets were just as severe. Many projects failed, but the resilience remained, and even more projects were launched.
To give an indication of the creation and hard work that believers put into crypto during this period, I recently came across this lecture / interview by Richard K. Lyonswho, as Chief Innovation and Entrepreneurship Officer at UC Berkeley, is perhaps best placed of anyone to comment on what the young generation’s eyes are drawn to.
The fascinating part of the interview, and what makes it strikingly relevant now, is that it took place in April 2018, which was in the middle of the last bear market.
The Revival
As prices fell in line with what they are doing now, Lyons seemed unfazed, claiming that “there are companies that are inviting our students to talk to them about blockchain … these young people are so much closer to this than any of us are “.
Of course he was right. Blockchain was just getting started.
Barely two years later, we had the explosion of decentralized finance on the scene, a huge vision that seemed to take aim at the way conventional finance is mediated through centralized agencies. The innovation didn’t stop there – NFTs waded into the mainstream, opening opportunities for artists, collectors and creators to take ownership of and monetize their intellectual property.
The aforementioned are just two examples of the growth that emerged in 2020/21, with the foundation laid in the fallow years of 2018/2019.
So while it’s true that there was a lot of froth around the room (and that includes NFTs selling for staggering amounts based on the Greater Fool Theory), which amounts to nothing more than bull market hysteria, the natural cyclicality of the market means that is natural and a pattern we have seen repeatedly throughout history.
In slightly less eloquent terms, the tweet below from Cardano founder Charles Hoskinson sums up the bear market well. In such an abominable macro climate, the price of high-risk assets such as cryptocurrency will always fall, regardless of fundamentals.
Yes, it’s called a bear market. That’s what happens. Nothing changes that. No announcement makes a difference. Cardano could cure cancer, give you a ten inch dick, give you a personal poker playing robot that also drives grandma to church on the weekends and we’d still fall
— Charles Hoskinson (@IOHK_Charles) 9 May 2022
Conclusion
The market humbles everyone and flushes away the excess. But the advocates remain in place here, the fundamentals of blockchain technology remain solid, and the foundations of this industry are in a significantly better place than they have been in previous cycles.
The one thing to consider, however, is that this is the first crypto winter to occur in conjunction with a bear market in the broader economy. This means that, despite everything discussed above, it is largely unique.
But with technology advancing and the industry taking off, there’s still plenty to be optimistic about, despite the hideous price action.
