Even in the most wildly overheated bull markets, investors still shiver at the possibility of an extended downturn.
But, even if we do see another Crypto Winter, what will it mean for Qredo?
To ward off any potential chill, allow me to explain in five simple points why I won't be packing my coat.
The first thing to be aware of is that Qredo didn't bubble up overnight in the froth of a bull market.
Brian, Anthony, and the other co-founders began pulling together ideas of decentralized custody way back in 2018 — slap bang in the middle of a bear market.
This was actually beneficial, as it gave the team time to prepare and build prototypes while even the most intrepid institutional adopters were still sitting on the sidelines.
Although a prolonged downturn is possible, I think that any bearish spell is more likely to be a cold snap than a deep Siberian winter.
Not only are more people now using and relying on crypto outside of speculation, but there is also more adoption beyond just retail traders. We're seeing first hand the extent of demand from financial institutions in DeFi, not to mention the dozens of mainstream firms — such as Adidas, Warner Bros, and Microsoft — that are exploring NFTs and the Metaverse.
As a result, we're seeing dispersion across the market: While DeFi is dropping, NFTs are popping; and as metaverse tokens are pushing higher, bitcoin is consolidating. Each segment is independently reacting to its own stimulus.
This changing dynamic reflects the maturity of crypto as an asset class, suggesting that the next time bitcoin goes cliff diving, the rest of the market might not be so quick to follow.
Historically, market downturns have proved to be perfect times to get ahead of the next big technological shift.
For example, after the Mt Gox hack — in what was arguably the most catastrophic bear market ever — few believed that crypto would ever come back. But it did, and it came back stronger as the single signature wallets that made the hack possible were widely replaced with multisig wallets (which we have since innovated on further with decentralized MPC).
In the aftermath of the ICO gold rush in 2018, the same pattern played out again.
As demoralized investors left the market, the first DeFi primitives — such as lending and automated market making — were falling into place. Maker, Compound, Synthetix, and other blue chip projects were planting the seeds of what would grow to become the pillars of decentralized finance as we know it today.
In the bear market of 2018, the market suffered a sort of spiritual crisis; lack of belief in crypto made it more difficult to raise funds, and projects without healthy reserves struggled to survive.
Now is a very different situation.
$31.6bn was poured into crypto projects in 2021 — amounting to more than the 10 previous years of funding combined. This upswing has continued in January, ensuring that crypto builders can keep plugging away regardless of market conditions.
Qredo's $120M war chest, stockpiled in the last 12 months through our Series A, seed round, and token sale, gives us ample resources to keep building over the next few years. (And for those wondering, we don't need to — nor are we able to — sell any of our QRDO tokens).
Regulatory clouds loomed large over the market in 2021, with ill-conceived regulatory efforts such as the U.S. infrastructure bill casting a big shadow.
Make no mistake, these clouds could quickly turn to storms as regulators grapple with this new asset class. But there is a silver lining. Although regulation has the potential to hinder adoption and innovation, it will also reduce the likelihood of a complete crackdown and remove the ambiguity that is deterring more cautious institutions.
And, with infrastructure such as Qredo's Travel Rule solution, those institutions will easily be able to stay compliant as they enter the market.
So, when people start putting on their bearskin jackets for a “winter”, I’d encourage you to stay frosty — the cold will make you stronger!