Startups: Why You Shouldn't Be Afraid to Launch a Project in a Bear Market

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The crypto market is going through a difficult period. The collapse of Terra in May brought down not only the promising DeFi market but also affected the entire industry. The war in Ukraine and record inflation also do not cheer up investors and market rates. The young history of cryptocurrencies has already proven that market sentiment is cyclical and replaces each other. In the article, I try to find out why despite the bear market and the impending crypto winter, businesses should not turn off their projects in the crypto industry and Web 3.0.

Crypto Winter 2018 vs 2022

To try to guess what lies ahead for the market, let's compare it to the previous 2018 bear cycle. The DappRadar resource recently released a report comparing the events of two periods of a protracted crisis.

In 2017, the crypto sphere experienced a boom in ICOs. The market was flooded with numerous startups and companies that used cryptocurrencies as a model for funding their ideas. During that period, almost any project that had the words “blockchain” and “crypto” in their names raised money. The situation was reminiscent of the boom in overvalued Internet companies in the United States, known as the “dot-com bubble” that burst in 2000.

The market was full of fraudulent projects and simply ill-conceived ideas that raised millions of dollars but never made it through the roadmap. According to DappRadar, about 90% of ICO-era projects did not survive 6 months after launch. At the same time, the launch of bitcoin-based futures, rumors of a total ban on cryptocurrencies in Asia, and the hacking of the largest Japanese exchanger Coincheck brought down the bitcoin rate by 65%.

The crypto winter of 2018 lasted 18 months, and asset prices and investor interest in the industry were low. But even despite the zero involvement of the majority, many projects and ideas started at that time, which still exists. For example, Axie infinity, future DeFi giants Uniswap, Aave, Curve, and others. The NFT markets, the play-to-earn games industry, the metaverses, and Web 3.0 also have grown during crypto winter.

If we compare the crypto winter of 2018 with the current market situation, we can find several important differences

Blockchain networks have changed. During the previous period, we saw several isolated networks, the features of which were understood by a small number of people. Now it is a whole ecosystem that attracts tens of millions of daily users. Programmers have developed tools that improve interoperability, speed, scalability, and convenience for users and developers.

The portrait of investors has changed. In 2017-2018, crypto startups were invested mainly by small retail investors. Now there are large funds and corporations on the market that allocate millions of dollars for the development of projects in the blockchain and web 3.0.

Large funds continue to invest in interesting ideas. If in the past period we observed a lull and extremely low interest in the field during the crypto winter, now investors are opening additional investment funds. For example, in early summer, the Huobi cryptocurrency exchange announced the creation of an investment unit with a fund of $1 billion, and the a16z crypto fund announced the opening of its 4th fund worth $4.5 billion.

Crypto funds are not the only ones investing in blockchain companies. The portfolio of the well-known venture capital fund Sequoia Capital, for example, includes startups such as the move-to-earn project StepN and the FTX crypto exchange. And this fund is famous for its ability to find projects that become unicorns in the future.

Cryptocurrencies are accepted as a legal means of payment. Many people use digital tools every day: transferring money to family, buying big brand products, and even paying utility bills. For example, bitcoin is officially accepted in several South American countries, and you can pay taxes with Tether in the Swiss commune of Lugano.

The blockchain industry has changed. It is now a diverse market, ranging from DeFi tools to the art world and NFTs. Web 3.0 multi-million dollar brands have grown, such as the metaverses of The Sandbox and Decentraland, which have partnered with Adidas, McDonald's, Gucci, and others.

In short, the cryptocurrency market in 2018 and now is incommensurable in scale. And if the so-called crypto-bubble did not burst, the market will most likely hold out now. After all, most blockchain startups are more than just a smart contract or a stock chart line, and an NFT is more than just a line of code.

When is the best time to enter the market?

The answer to this question is any. History shows that during the bear hibernation and bull run, there were successful and unsuccessful projects. Of course, these are difficult times and the market is in a phase of caution and waiting, but in general, this will not be an obstacle to good ideas and concepts.

A few tips for projects that plan to start in a bear market.

1. The idea is important. Investors are now acting with caution and choosing projects carefully. However, it also works positively - the market has cleared of speculators who dump paper at the first opportunity. A more loyal audience enters good projects and provides support.
2. Build a strong community. A successful project is not only a great idea. Do not forget that there are people outside the smart contract. The bear market is quiet, so it pays to focus on building and motivating a loyal audience.
3. Make a development plan for the project. The wrong listing strategy can be costly and slow down the development of even the most promising startup. The needs of the project and the community should be studied to select the most promising exchanges and launchpads.