The crypto sector is not facing its best time ever. With the bear market advancing, cryptos are losing most of their value and many venture capital firms, which once were hyped about the market, are now not very keen on investing in the industry.
For instance, the CEO and founder of Digital Currency Group, Barry Silbert, has affirmed that many deals between venture capital firms and large crypto companies started to go sour as the market is facing such challenging times.
Despite all these troubles, the largest crypto exchange in the world, Binance, has expanded its business and will be launching new crypto incubators across the world in Berlin, Buenos Aires, Lagos, Singapore and Hong Kong in March 2019.
Why? The CEO of Binance, Changpeng “CZ” Zhao, has affirmed on Twitter that they are more comfortable investing now because “valuations are more reasonable” and only the strong teams survived.
That’s a rather positive view of the market, surely, as some people feel as if it is falling apart. However, CZ is right about something: the hype is dead, prices are lower now and only the most clever and well-prepared companies will survive the bear year.
The Market Was Overvalued In 2017
CZ believes that most venture capital firms are only out for a quick profit. They want to invest only when they are positive that there is money to be made. Binance, however, believes in the future of the market. This is the main difference between the companies which are leaving the crypto market now and Binance, which has made a conscience decision to stay.
CZ believes that it is better to invest now in new companies than in a bull market, too, as the prices would be normally too inflated. For instance, last year many blockchain projects achieved unbelievable values like $1 billion USD without having a working product or even users. It was all a crazy game, made possible by a bubble.
Even the creator of the Ethereum network, Vitalik Buterin, clearly saw how the half a trillion USD value of the crypto market was an exaggeration. In 2017, he suggested that it was difficult to justify the value of the market when not a lot of people had adopted the technology yet.
“How many unbanked people have we banked?” he questioned at the time. It was clear even then that there was plenty of exaggeration in the market.
The answer to Buterin’s questions came later. The price for most Ethereum-based ERC20 tokens has sharply declined since last year and most of them simply failed and were removed from the market. Exchanges and similar products maintained their valuation, but altcoins tanked hard.
This is the main reason why Changpeng Zhao believes that it is better to invest now. If a company is trying now, it was already baptized by the bear market and will grow to be stronger than many of the companies born during the hype.
Also, one should notice that there is a clear cycle in Bitcoin. During its 10 years of existence, Bitcoin has crashed four or five times and only come out stronger later. The strength of the asset is constantly improved this way.
While some companies simply could not wait for the market to be better, the giant ones like Binance, Andreessen Horowitz, Nasdaq, Fidelity and others got all the time and the money in the world to wait until the next bull run.