Blockchain.com CEO on Crypto Winter: We’re Now Entering ‘Despair’


  • Crypto has been in a bear market for nine months now, Smith says, and now we’re definitely in the crypto winter.
  • Blockchain.com was one of Earth’s first investors, but sold its LUNA stack before the crash

Cryptocurrencies have fallen collectively by 45% since the beginning of the year, for the first time in three years in the bear market.

As with the previous fall in the cryptocurrency spanning 2018 and 2019, layoffs are beginning to occur.

Cryptocurrency exchange employees were the first on the block: BitMEX and Gemini have promised to cut staff since April, while Coinbase plans to terminate accepted job offers to reduce costs.

Without naming specific companies, Blockchain.com CEO Peter Smith at this week’s Money20 / 20 conference in Amsterdam said many crypto companies have grown too fast, without focusing on becoming profitable.

Blockchain.com CEO Peter Smith | Source: Blockchain.com

“We are the smallest cryptocurrency company in terms of number of employees; others have thousands of previously profitable employees,” Smith said, noting that several companies unsustainably spent up to $ 800 million on marketing costs during this cycle.

Smith added: “A lot of that has to take up space, not just in crypto, but in fintech in general. We’re going to see a fundamental rotation of growth to free cash flow.”

Smith said investors have pushed Blockchain.com, founded in 2011, to spend more on marketing and grow faster during the previous craze. Bitcoin went from $ 9,000 to nearly $ 62,000 between the second half of 2020 and November 2021, causing explosive growth across the entire crypto industry.

“Every company that has followed that strategy has had a dramatic growth in their business: the big growth rounds are collapsing, the companies are now going up in price – it’s going to be hard for them to adapt,” Smith said. Earlier this week, reports surfaced that crypto lender BlockFi was seeking to raise funds with a valuation of $ 1 billion, down from $ 3 billion in its previous round in March 2021.

The three eras of cryptocurrency bear markets

According to Smith’s estimate, the current bear market is nine months old, causing more pain on the horizon if past patterns are repeated.

However, it is being debated whether a bear market is equivalent to the dreaded “cryptographic winter”.

After all, the previous bear market lasted significantly more than nine months, and the depths of the crypto winter saw bitcoin fall almost 90% below its 2017 peak.

In an interview with Blockworks, Smith described what he calls the three eras of bear markets: the beginning, which is hard to perceive; the medium, where despair enters; and the new normal.

“We are entering the second era [despair]which is my favorite, “Smith said.” I’m a free market capitalist and I enjoy the cleansing power of the market. ”

Otherwise known, he said, as the chapter where the tides go down and we all see who wears pants, echoing Warren Buffett in a 200-year-old Berkshire Hathaway profit call. Buffett is a vehement cryptocurrency.

This stage is also defined by the ability to differentiate quality projects, for the benefit of customers, teams and shareholders.

“The last stage is when everyone looks around and they say, ‘Oh, this is crypto now, and we’re all going to figure out how to make it work.'”

Blockchain.com left LUNA’s position before the crash

Blockchain.com never included Terraform Labs’ failed stablecoin UST, even though the platform offered LUNA. Smith resisted UST, describing the decision to avoid stable currency as “not a popular choice.” There was some internal pressure to offer it so that users could unlock up to 20% APY on the Anchor loan platform.

“Consumers love 20%, but consumers also hate zero,” Smith said, referring to the collapse of LUNA and UST.

Blockchain.com, however, was one of the first investors in LUNA, long before UST. Smith said he had doubts about the sustainability of the Earth ecosystem and finally left the position before the crash.

“Anything that goes up too fast worries me,” Smith said. “Solana also went up too fast.” Solana is currently changing hands for $ 41, 85% below its $ 260 record in November.

Smith also doubted algorithmic stable currencies, despite investing in a few. He said it would be “great” for one to work, but by default he is inclined to believe that he will not do so and wants to be shown to be wrong.

Still, the cryptocurrency veteran scoffed at the idea of ​​taking Justin Sun’s new stable algorithmic currency seriously, the decentralized US dollar (USDD). The USDD’s circulating supply has skyrocketed from zero to more than $ 700 million since early May.


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  • David Canellis

    Locks

    Editor

    David Canellis is an Amsterdam-based publisher and journalist who has covered the cryptographic industry full-time since 2018. He is very focused on compiling data-based reporting to identify and map trends within the ecosystem, from bitcoins to DeFi, cryptocurrencies to NFTs, and beyond. Contact David by email at [email protected]



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