How do crypto startups plan to deal with the so-called crypto crisis?
The recent multi-year bull run in cryptocurrency is finally gradually ending. Since the esteemed Supreme Court of India overturned the prohibition on cryptocurrency trading in March 2020, we have seen a rise in both the number of investors and the number of crypto businesses operating out of India and serving the rest of the globe. It was believed that roughly 20 million cryptocurrency investors in India benefited from the bull run when Bitcoin hit record highs last year.
In the present, dread and caution have taken the place of the market’s earlier excitement. This might be seen as beneficial in many aspects since it can make the area more mature. It is essential to return attention to the fundamentals, not just for investors but also for crypto entrepreneurs. Companies need to realize that they need to embrace a long-term perspective, much as investors have realized that cryptocurrencies are not a get-rich-quick scam. The only businesses that can succeed in crypto are those with solid business strategies.
The fundamentals are still as robust as ever, notwithstanding the current bad feeling around cryptocurrency. This indicates that builders have potential in this area over the long run. The recent correction presents excellent possibilities for crypto firms prepared to double down and seize them, keeping with the adage that every crisis is a gift in disguise.
To survive this corrective period, the following is what cryptocurrency companies must do:
- Keep building and Innovating
Bear markets are the ideal moment to construct. Businesses in the cryptocurrency space have the chance to double down and develop robust solutions that support cutting-edge services in the industry, whether they be for investment, payment systems, financial services, metaverse, NFTs, or other uses.
But businesses will have to innovate if they want to survive in these trying times. In a few years, the country’s regulatory issues over taxes and the legality of cryptocurrencies should be resolved. As a result, crypto businesses will need to adjust to these developments.
Ideally, this innovation will encourage acceptance and bring about even better times for the cryptocurrency sector in the future. This forecast is based on historical data rather than optimistic assumptions. Each severe correction that the Bitcoin and cryptocurrency markets have had to go through has sparked innovation for the sector as a whole.
In reality, Layer 2 scaling solutions rose to prominence during the previous crypto winter.
- Control your cash flow and strive for durable company strategies
It’s time businesses stop wasting money and start being more frugal. To survive the bear market and keep developing, they must carefully manage their current financial reserves and guarantee enough runway.
We have observed instances of poorly managed businesses that were already victims of the price collapse due to bad management and a lack of good risk management tools. Crypto firms must invest in long-term expansion while preparing for many contingencies.
- Building a strong team
Bear markets are the perfect time for intelligent firms to take a step back and develop their skills for the future, even if we have witnessed layoffs across the cryptocurrency industry and even in India. Employees may receive enough training and growth opportunities during the correction. Instead of recruiting too many people, businesses may devote enough time to hiring effectively, developing team skills, and making plans for the next bull market.
- Educate people about cryptocurrencies to encourage adoption
The use of Bitcoin and other cryptocurrencies has increased significantly throughout the most recent bull run. There is still a long way to go, though.
Many still have a vague understanding of the hazards and opportunities associated with cryptocurrencies. Other than mere investment, a better ecosystem and a market for various products and services within the industry will result from an increase in awareness and knowledge.
How the Corona issue will impact the blockchain environment, businesses, and Bitcoin
The Coronavirus issue is also impacting the crypto market. In this brief piece, I want to share my ideas regarding how Coronavirus affects the blockchain industry, including businesses, startups, and Bitcoin. The main argument presented below is that established startups with some exposure and B2B relationships can now grow on these contacts because there is already some initial human trust following initial meetings or workshops.
Since individuals can no longer physically interact (no meetings, workshops, Meetups, conferences), initial human trust cannot be built, and freshly launched businesses or foreign firms will have minimal opportunity to penetrate the local market. If established companies can survive for a few months without funding, they can still expand and build on current ties. Existing interpersonal bonds between business partners serve as a “trust obstacle” that newcomers cannot surmount.
Corona crisis: dangers for blockchain startups
In general, the existing environment presents difficulties for blockchain companies. Rounds of funding become challenging or perhaps impossible. Larger businesses will progressively freeze their budgets. Startup businesses will struggle with sales activities, particularly those in the B2B sector. The essential conferences and events for entrepreneurs will be postponed for months.
As a result, discussions will no longer serve the crucial purpose of allowing entrepreneurs to network and showcase themselves. Although each situation is different, entrepreneurs will probably find it simpler to conduct business in the area of cryptocurrencies than in enterprise DLT. A blockchain firm that attempts to sell a prototype to a significant enterprise right now will struggle.
Larger organizations will keep their options open and shift their priorities harshly, including cooperation partners, clients, and PoC partners. They will put off what they don’t necessarily have to do. Projects related to orchid innovation and prototype development can be postponed or discontinued. In other words, it will be difficult for startups, which is not surprising.
The following will be outlined and is crucial: Not all startups will struggle. Hence two groups of blockchain businesses must be distinguished for this purpose.
Young startups are struggling throughout the crisis.
These businesses are startups, some of which may only be a few months old. Additionally, many firms have not yet attracted investors or attained considerable recognition. In my opinion, the bulk of these early-stage firms confronts insurmountable obstacles. In reality, this is a losing battle against the wind over the next six months.
Reputable startups: chances are there
These are established startups that have gained notoriety here and there throughout time. At conferences or other workshops, contacts were made. Through the early personal conversations, trust has been developed. If these firms can make it through a few months without receiving any fresh money, they will have it much easier and could benefit from the crisis. Furthermore, a well-established startup may potentially offer some unusual opportunities.
The main idea is as follows: Due to social distancing, which the Corona crisis has quickly forced into existence throughout the world, companies that are not yet established in their home nation are affected (e.g., foreign competitor startups or newly emerging competitors) no longer have an opportunity to develop themselves in their country.
On the other side, established startups that already have relationships can strengthen these connections despite social distance through video or telephone conferencing. Some businesses still desire to advance their blockchain initiatives (e.g., small profitable banks, possibly agile medium-sized companies). These will function with the startups they are already familiar with. In this situation, newly established businesses or foreign companies joining the local market have little chance.
The Coronavirus may be a substantial barrier for existing firms in this regard, just as it can be for new rivals just entering the market.
Corona crisis effects on Bitcoin and the cryptocurrency market
It is already evident that Bitcoin may be sent without restrictions or interruption. The Bitcoin network has consistently created a new block every 10 to 11 minutes, even over the past few days. It is tenacious. I believe this is becoming increasingly clear to people. Many people have realized recently that nobody, not a virus, not an institution, and indeed not the strong Bitcoin network, can stop it. This also applies to other cryptocurrencies like Ethereum.
Of course, we still have scaling problems and network congestion. However, decentralized networks like Bitcoin and Ethereum have shown themselves resilient to pressure. Bitcoin can sometimes be referred to as “digital gold.” Last week’s price decline resulted from a supply shock brought on by deleveraging and panic (especially liquidity fears). One may legitimately claim that Bitcoin’s price would increase after falling recently.
Bitcoin may prove helpful, mainly if an economic catastrophe develops. But for that, investors need to have a deeper understanding of Bitcoin. It will take time to educate the public because everyone is still in shock. People continue to be dubious of bitcoin, but this scepticism can only be dispelled by research and education. That, in my opinion, explains why the price of Bitcoin has fallen as much as that of almost any other asset.
Reputable businesses and corporations
Businesses are already starting to alter their objectives, as is evident drastically. After just a few days of the Coronavirus in Germany, budgets are frozen. More importantly, workers in businesses must first understand how to use technology. If workers work from home or are missing entirely, decision and governance procedures must be reorganized. Corporate Germany is currently moving ultimately online after learning the hard way. Naturally, this will delay things and cause resource freezing.
Of course, each situation must be evaluated individually. Still, on the whole, it can be argued that larger, more established businesses would experience significant adjustment issues, perhaps jeopardizing new initiatives that are not necessary. Fast-moving and agile companies, such as small banks, targeted financial service providers, and quick-thinking medium-sized corporations can benefit from this.
Large, sluggish, and formalistic corporations and organizations (think of the actual signature folder used or the physical printed documents to be signed) could be incredibly slow or perhaps unable to adapt to the new scenario we now have to tolerate 1-2 years.
edited and proofread by nikita sharma