Corporate Finance, DeFi, Blockchain, Web3 News
Corporate Finance, DeFi, Blockchain News

Connor Borrego, Web3 expert, explains what a “crypto winter” is, and how it relates to the bear market

By Connor Borrego, a Midwest Based Technology Entrepreneur.

What is a crypto winter and what causes them?

Historically the value of crypto currencies have moved independently of the larger equities markets and were much more sensitive to Bitcoin Halving events and other blockchain related news, and because of this traders within the crypto markets developed the term “crypto winter” to describe what would be considered a bear market, or a market downturn, in the traditional equities markets. It’s name is likely attributable to crypto’s meme-driven culture and the popularity of HBO’s Game of Thrones with their “Winter is Coming” meme.

What should someone who has bought into crypto do during a crypto winter? (maybe add in top 3 tips as a checklist of what to do)

For investors experiencing their first market downterm, or crypto winter, it will come down pretty explicitly to a personal choice of how to respond. You bought the hype, the run-up of the market to it's all-time highs, now your investment is worth just 20-40% of what you initially invested, and it just hurts to look at.

Consider first your motivation for making the investment in the first place and the timeline you had expected to earn your return on the investment, if your initial thesis was “I’m not going to look at this for 2 years,” great just continue to follow that original thought and stop checking prices on the daily. If you were looking for a quick flip, I’m sorry to say you are either cashing out a loser, or in the thick of it now and I’d encourage you to stop checking on your investments and return to them in the next bull market, just remember not to lose your passwords.

Now for people who haven’t lost faith in the future of this technology, Crypto Winters present the best opportunity to accumulate tokens at cheap prices. Being safe with your investment strategy would mean to continue to dollar cost average into bluechip tokens like Bitcoin, Ethereum, and Solana, but if you are looking for a larger upside taking a risk on some of the lesser known alt-coins could be especially lucrative if there looks to be an actual use case and customers utilizing the technology.

In the last crypto winter a lot people were able to allocate some of their currency to NFTs that would record the token based value of their purchases so when the bullmarkets returned their NFTs ballooned in real dollar value. It’s uncertain whether that approach will remain a viable strategy, but its certainly worth exploring if your portfolio could support such speculative investments.

What will the recovery process look like and the future evolution of crypto after the winter?

The recovery process is far more tied these days to the larger macroeconomic environment, and specifically the performance and sentiment around the tech sector, which are typically seen as growth stocks and will now need to tamp down growth expenses and shape up their core operations to become an attractive investment to investors.
This same requirement and approach to investing in cryptos will have a big impact on where capital is allocated throughout the crypto winter. Fortunately for those with software development skill sets, developing products is a function of time to commit to working on them, so teams that are developing software products that address real problems will attract the capital necessary to grow, and those that can develop traction before requiring funds will be in the strongest positions to receive investment.
Ultimately the money that often gets spent in wasteful ways during bull market cycles has disappeared and teams are far more strategic about deploying capital, and the ones that can be most focused on building sustainable business models around their solutions are going to win out.

If we look at historical trends of how long it takes software companies to acquire their first million users or customers, a clear benchmark of success and some modicum of product market fit, we should begin to see the light at the end of the crypto bear market in 18-24 months as projects work towards those noteworthy goals. 1-2 breakout successes from a product perspective could be enough to ignite a longer term bull market rally.

Connor Borrego is a Midwest Based Technology Entrepreneur. He received his Master’s of Science in Business Intelligence Systems from Syracuse University, and he received his Bachelor of the Art’s in Entrepreneurial Communications from the University of Michigan. He has worked for the past decade in the advertising technology industry, most notably as a Startup Growth Consultant for Google. Currently Connor is commercializing a blockchain powered software to help musicians increase their earnings as an artist and grow their online audience.

Socials: @3lpr0f on twitter & tik tok

Vendredi 23 Septembre 2022