The date is 11th May 2022. UST has de-pegged from $1 to a measly $0.43, and even more impressively (due to its minting and supply algorithm), the Terra Luna token has managed to fall to $1.60, down 99% on the week.
The aftermath was impossible to avoid – multinational news corporations like BBC and CNBC were covering it on their primetime shows, smug influencers and trad-fi types were boasting about how they predicted this Ponzi-nomic catastrophe years ago and both #luna and #ust were trending worldwide on Twitter.
The aftermath was clear to see, with both institutional and retail traders’ portfolios alike looking more akin to a packed Liverpool allocation at Wembley than anything else (to our American brethren who are struggling with that metaphor, Liverpool play in all red).
BTC dropped to a multi-year low of around $26.5k, down 61% from its all-time high. ETH and other high-profile alts sawdouble-digit declines, and don’t get me started on the smaller profile alts (‘rekt’ doesn’t quite cut it). This could easily have been crypto’s Lehmann Brother’s moment – a domino effect so to say.
Multiple funds and firms within the crypto space are intertwined – both through human and financial capital - so a catastrophic liquidation event could have easily seen these entities fall with terra. Whilst the ashes of the crash aren’t yet settled and the majority of the finer details regarding terra’s collapse are still yet to be finalised, the space seems to have survived.
It would be foolish to say that this event won’t have both calamitous tangible and intangible effects across the entire space, but the fact that we didn’t fall more is a testament to how far this space has come and the conviction of the people within it.
Whether we are in a multi-year bear market like we have seen previously is up for debate, but it is now futile to argue that we are indeed in a bear market. On its face, this seems like a doom and doom scenario, but we feel that this is a once-in-a-lifetime opportunity. For budding crypto and blockchain projects, this could be an absolute blessing in disguise - and here are 3 important reasons why:
1. Building with less Pressure
During a raging Bull-market, almost everything seems like it will 10x, regardless of the product and the value proposition. This has caused countless founders to rush their projects, putting a half-arsed version of their vision into the ether to try and join in the endless cash grab. This often comes too late and the hype train is slowing down, meaning that the project doesn’t seem to moon like the rest of the already established market.
Once the bubble inevitably bursts and the sell-offs commence, you will be left with a half-working product going into the bear market. Your brand image will be completely destroyed and word will spread like wildfire (Crypto Twitter doesn’t miss), meaning that your once impassioned vision will fall further and further into the abyss, never to be seen again.
A bear market has the opposite effect. As there is no rush to launch to join the marauding hordes of bulls, the project and its code can be stress tested again and again, focus groups can be widely expanded and well thought out and troubleshooting can be planned ahead of schedule.
This huge drop in pressure means that founders and engineers alike will be able to take their foot off the gas, avoiding burnout and producing much more productive results. Once the new bull market commences (which history tells us it will), your project will be in a much better position.
2. Seeing What’s hot and what’s not
Each bull market seems to have its narratives – one or two types of projects that seem to be the shiniest to the retail magpies. In 2017, it was the ICO hype, 2020 has Defi summer and the 2021 run was consolidated around NFTs and Layer 1 ecosystems (solunvax). Sitting on the sidelines during a raging bull market can test the patience of a saint – but the risk-free lessons learned could turn out to be invaluable.
Some of the big winners of 2017 were bitcoin cash, IOTA and dash, but these can barely be seen in the top 25 coins in today’s CMC list. This will happen to some of the strongest performers of the 2021 run too, and there is normally a trend to go with them.
If your project has a similar vision or a competitor to one of these types of tokens that is cooling off as the market turns bearish, it could mean that this type of project will not perform anywhere near its peak in the next run. This information could mean that a project’s long-term goals could be hindered as a result, meaning that it could in fact be better to quit before more losses are attained. On the flip side, it could also shine a light on the next run’s shiny projects, leaving your vision in a prime position.
3. Loyal Community Building
Every member of a web3 team, whether it be the CEO or a community mod, will have been inundated with requests from ‘moonboys’ saying ‘wen binance’ and ‘wen launch’ – the list goes on. These are the leeches of the crypto ecosystem, moving from project to project without knowing what any of them do fundamentally and expecting a 1000x return after 40 minutes of buying, or it’s ‘wen marketing’ for you (shudders). During times of turmoil, these types of investors will leave (whether it is a short hiatus or to never return), leaving the intelligent and convicted community members behind.
Whilst the socials and telegram/discord groups are mostly filled with these types of affiliates, more stringent conversations will happen and the community will start to build a camaraderie that just couldn’t be done beforehand. The investors that stick through the bear and sideways markets will have high conviction on your product, and you can fully count that they will be the first ones you can count on when you need an army of followers to spread the word about your project when the time comes.
For both founders/builders and investors alike, bear markets can be extremely scary. However, there is always light at the end of the tunnel, and if you play them correctly, they can actually be the most profitable and productive times of all. Here at Blocksultancy, we specialise in all of the above and much more – please email us at contact@blocksultancy.com to get in touch and check out our website for an extended list of our services.