The Upside To the Bear Market
Sun Tzu famously said “in the midst of chaos, there is also opportunity,” a quip that certainly applies in today’s bear market. However, with so much economic chaos it could be easy to overlook some opportunities. Despite the crypto market crash, several good things are happening that investors should take note of.
Shaking out bad actors
Overconfident investors, bad business partnerships, and algorithmic stablecoins have all had their heads handed to them on a silver platter in the second quarter of 2022. Many factors have contributed to the crypto crash––both directly and indirectly.
Greed from overconfident investors
Many people have entered the market driven by FOMO (fear of missing out). The enormous gains made by some have led to mordant greed.
DebtHammer has reported that almost 25% of investors have taken out loans to invest money they didn’t have in the crypto market.
Nevertheless, the bear market is recalibrating investor outlook. As of press time, the Fear and Greed Index is clocking in at 20, considered “extreme fear.”
2. The failure of algorithmic stablecoins
The catastrophic collapse of Terra LUNA damaged the reputation of all algorithmic stablecoins, and DeFi in general––perhaps irreparably so.
After investors noticed in March that Terra’s returns would diminish throughout 2022 they began selling the stablecoin, UST. However, Terra’s algorithm required investors to convert their UST to its sister stablecoin, LUNA, in order to yield fiat dollars.
The mass exodus bottlenecked the algorithm forcing investors to wait in line to sell while watching their investment crash in real-time.
3. Poisonous partnerships
CoinFLEX is the latest exchange to claim insolvency in the crypto market crash. CEO Mark Lamb claims that high-profile investor Roger Ver is in breach of contract after Mr. Ver failed to “top up margin” in his CoinFLEX account. Now CoinFLEX is $47M in the red.
The brouhaha has flared up again recently with both parties claiming they are owed money from the other. While details are still murky, one thing is clear: both were dependent on the other to keep the exchange afloat. Now it’s the investors who are left holding the bag.
No matter who turns out to be right in this scenario, we can be sure that this problem would not have come to light when it did without the bear market.
New opportunities
Around the world, millions of people living in distressed economic conditions are seeing the value of Bitcoin.
After Argentina’s Economy Minister resigned last month many Argentinians turned to crypto as a hedge. Subsequently, Argentina now ranks 10th among countries with the highest crypto adoption rate.
In China, the case for Bitcoin is strengthening after citizens stormed banks in Zhengzhou following the central bank’s deposit freeze. A possible loss of $1.5 billion prompted protests and calls for Bitcoin adoption.
Image: courtesy New York Times
Strong performers
Despite the bear market there are cryptocurrencies and NFT projects performing well. With strong fundamentals, engaged community and undaunted leadership several projects continue to succeed. The following are three examples of strong bear market performers:
Art Blocks
Art Blocks has built a community of digital artists and blockchain developers to create unique works of art using algorithms. By putting their community first, Art Blocks has “[established] a new paradigm for the creation and ownership of art.”
2. USDC
USD Coin (USDC) One of the most popular stablecoins on the market today. It is tied to the U.S. fiat dollar on a 1:1 basis and audited regularly. It provides a hedge in the crypto market, which is volatile at the best of times. Operating on the Ethereum blockchain, USDC is secured by ERC-20 to service payments, lending, investing and trading.
3. Binance
Another USD-backed stablecoin, Binance USD (BUSD) is a regulated stablecoin With Binance, users can transfer U.S. fiat dollars with no exchange fees. It is transparent with an audit report published monthly. It is available as collateral, a loan asset, futures investments and payment for goods and services.
The bear market reveals much
The bear market is more than just shrinking portfolios and red candles. There are still strong projects out there and good things happening.
Bad actors and shady investors are being screened out and a new era of opportunity has arisen for people to take back control of their data and their money.
These things probably would not have come to light when they did without the crypto market crash this year.
