As the crypto winter continues, there has been plenty of speculation around what lies on the other side. Regulators are paying closer attention to the space than ever before, and a number of companies have already fallen victim to the bear market.
Among those that remain standing, this market cycle — although difficult — comes with silver linings.
As Sino Global Capital CEO Matthew Graham says at Token2049, “The LARPers are gone, and the true builders are here.” Surviving these market conditions is a testament to a company’s real world value. Projects are no longer being funded out of speculation or hype, but rather on the basis of their utility.
It’d seem the crypto space is becoming healthier, despite what current coin prices might suggest. For some investors, this has been an ideal time to start buying in.
I tend to be very counter-cyclical. I fundamentally believe that bear markets are where you make money and bull markets are where you find out how much money you made.
– Matthew Graham, CEO, Sino Global Capital
“I get really tight and stingy [during bull markets] when I see people buying yachts and being very happy,” Graham continues. “Then, in bear markets, that’s when we get much more aggressive.” Since valuations are a lot more reasonable at this time, Graham sees it as the perfect time to be investing.
Folius Ventures founder Jason Kam reaffirms the sentiment, commenting on the Web3 space’s continued growth and development.
Kam believes Web2 founders are being driven out of the space due to a range of factors, whether it’s poor compensation or stock prices. “Web3 is a really interesting alternative for them, so the quality and number of founders [in Web3] actually improved this year.”
Where is the crypto industry headed?
In the early days of crypto, the industry was primarily affected by endogenous factors. The prices of coins such as Bitcoin and Ethereum didn’t react heavily to broader economic changes.
Today, crypto prices have become more responsive to macro events.
Ryan Kim — co-founder of South Korean crypto venture fund Hashed — believes this presents the perfect opportunity for the space to grow and evolve.
“This bear market is not like the one in 2018,” he says. The downturn isn’t limited to crypto, but other financial markets as well. Given the equal footing, companies in the Web2 space remain motivated to enter the world of Web3.
Apart from companies, Kim adds that regulators should use this time to strengthen their foundations and prepare for the growth of the crypto ecosystem. “We’re in close contact with [regulators in Korea] to come up with the right policies and regulations.”
Crypto adoption has continued to increase in recent times, with on-chain activity as high as it has ever been.
Gleb Kostarev, Regional Head of Binance (Asia), believes Asia, in particular, has played a huge role in this. “In some Asian countries, the traditional financial system is not so strong. It opens the opportunity for crypto to be adopted.”
Kostarev refers to the collapse of traditional finance in Sri Lanka and the high inflation rates in Turkey. “There is huge instability in the world [in terms of] economy and politics, but actually, this instability is really driving crypto adoption.”
That being said, in some jurisdictions, regulators have been slowing down the rate of growth. “In countries such as India and Indonesia, we see taxes per transaction. This is affecting the industry’s [local presence] in a bad way.”
Kostarev acknowledges that regulators have their own concerns to address and adds that it’s the job of industry players to help them understand the space better. All things considered, he says, “Asia will definitely be one of the key drivers of the next bull run when it starts.”
Is crypto ready for a mainstream audience?
While adoption is increasing, there are still concerns that everyday users can have a tough time getting started in crypto. From creating wallets to researching protocols, there’s a lot to learn before one gets comfortable in the space.
“Fundamentally, we have to be more mainstream friendly,” says Matthew Graham, in reference to crypto’s DeFi applications.
I like to think of my mom and my sisters as an example, because they’re very smart people that are not highly technical. If I have to explain [private keys] and the [need to protect against hackers] to them, they’re never going to use this stuff.
– Matthew Graham, CEO, Sino Global Capital
DeFi requires users to take responsibility for the safety and protection of their funds. The space has seen countless scams and rug pulls in recent years, and even for individuals willing to put in the time, it can be tough to stay secure.
Although they’re free from human error, DeFi protocols are susceptible to hacks. Without an understanding of smart contracts, users can’t determine whether a protocol is at risk of being exploited. In a quest for user-friendliness, crypto might need to move away from its ethos of decentralisation.
“I think the anonymous characteristic is quite a tricky point,” Kim comments on DeFi from a regulatory perspective. Due to a lack of KYC checks, criminals have been able to launder funds through DeFi protocols such as Tornado Cash.
“For [mass adoption], technical aspects need to be very easy,” Kim adds. He says that normal users should be able to participate in DeFi without needing to create a crypto wallet.
“Maybe a centralised entity is needed to provide a better user experience. Also, if an [incident] happens, they can [be held responsible] to recover the users’ money.”
Featured Image Credit: Binance