The Cryptocurrency Down Market: Don’t Lose Sight of Fundamentals

The Cryptocurrency Down Market: Don’t Lose Sight of Fundamentals

Guest post by Cal Evans from Gresham International

Cal is the Managing Consultant of Gresham International.

We are now entering the sixth month of the seemingly never-ending bearish market that has become the new norm within the crypto world. Regardless of whether you see this current market as a market correction, a new phase in crypto, or something in-between, the reality is that we are now in a very different position to where we were six months ago.

For those of us who have been in the industry a while, we remember high profile events where Lamborghini’s flouted the no parking zones outside prestigious events in New York City. Big names from the software, finance, and technology world descended onto TV proclaiming Bitcoin (and other coins) as the new gold—encouraging people to grab a shovel—and youth who spent their time playing online games who now had enough money to buy their parents’ houses.

With the drop and change in market conditions, however, there has been a massive knock-on effect across the industry. Some of the biggest names are now declaring that they will be making staff cuts along with releases announcing that they will not be able to meet their intended goals post-ICO (Initial Coin Offering) raise. Many event organizers who hosted three or four events last year will now only be hosting one, a bleak position for those involved in the once glorious crypto industry and a far cry from the private license plates outside events in New York.

But, like all changes in market conditions, there will be some lasting impacts. As the legendary Warren Buffet once said, “buy when there is blood on the streets.” To put that in context, where there is blood, there is pain. It is simple logic.

The current situation, it seems, is bleak.

However, there is an expression on the island I come from—maintain a stiff upper lip.  This stiff upper lip has got us through many instances of downward turns within our lives. From the daily bombing of our capital city to the current situation of tumbling (or falling) out of the European Union, on all occasions, Brits retain a stiff upper lip. For those of you who don’t know what this means—it means that you retain your composure at all times.

The reality is that the overall status of the financial world is currently on a downward turn. Housing markets have stagnated and are beginning to recess, larger stock markets have started to push downward, and the FX market has seen a significant slowing rate in larger movements.

Whichever way you turn, there seems to be an excuse for this change in market conditions. These include (but are not limited to) Trump, Brexit, elections, protests, and any other kind of event you can think of. The reality is that the financial world is on the verge of a downward trend and a recession is a forecast (that’s not publicized) in many parts of the world.

When markets tighten, the first thing that is disposed of is those commodities that people don’t need in day to day life. Essentially the second home, second car, and luxuries above the necessities are disposed of. Unfortunately, as most cryptocurrencies are nothing more than a luxury that is easily disposed of, many people facing a tougher economic situation will dispose of their cryptocurrency first. This is, after all, much easier than phoning a broker to dispose of shares or putting a second car up for sale. The cash is easily accessible.

However, let’s stop there. There are many encouraging upsides to these current market conditions. We can already see how it impacted the industry positively. Let’s look at some of these effects a little closer.

Those who have to change their corporation or business will become more streamlined and will end up being stronger for the changes. The companies that conducted ICOs, their project will be truly tested with limited financial room for non-essentials that are not needed to deliver the project goals. The good old days of projects raising millions and putting shooting ranges in their offices have now passed. Solid business with a solid plan is the new way.

Companies that are currently undertaking an ICO are having to look carefully at where they are in terms of fundraising, having to ensure that their project is watertight, realistic, and embraces achievable goals. Those who are looking internationally for new exciting fundraising methods are adopting the Hybrid Token Offering approach (issuing both Security and Utility Tokens), ensuring that those who are parting with hard earned money are actually receiving something of benefit or participating in a project that has been fully scoped, not rushed together in a haze to grab as much cash as quickly as possible.

As for the ‘experts’—this period will also help to identify those who care about the industry, who have skills that can be used and are not just in it for the glory. We now see examples where many ICO “experts” are out of a job (no major loss there), and the ones who are changing over to STO (Security Token Offering) “experts” without any qualifications, certifications, or regulation will ultimately end up fined, or worse. There are undoubtedly a number of LinkedIn profiles that will be changing over the next few weeks and months. It will separate those who care about the industry and those who are in it for the money. Some experts are not even bothering to show up for events now and simply appear via video link, a change from an industry once praised.

There is even the upside of more lawsuits getting filed. Where people have lost money (during an ICO) and a project has obviously failed to deliver, those people who undertook the ICO may need to justify why they spent what they did and how the money was used. Any wrongdoing should be punished. New case law will be sought and the courts will begin to develop a framework for cryptocurrencies and financial raises in the future and put an end to the uncertainty.

Finally, those sites we all despise for selling project ratings for cash will die. Probably the best part about the whole downward market.

In all of its pain, this period will be a true survival of the fittest. A period where the market will contract and dispose of all of the bad news that has come with it. After all, we know that where there is money there are bad players and people who are not looking to achieve anything other than to make a quick buck. The pain is worth it, and the pain will show the world what we have all known for some time now—that once we are through this, cryptocurrencies are not going anywhere.

Guest post by Cal Evans from Gresham International

Since 2016 Gresham International assisted entrepreneurs, companies, governments, and groups launch their currency or token offering to market.

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Filed Under: Analysis, Guest Post, Opinion
Cal Evans

Cal Evans is perhaps one of the very few international technology lawyers with expertise in ICO compliance and strategy. A law graduate from London, Cal is a UK lawyer and US multi-state litigation expert. In 2015, Cal undertook his certificate in financial markets from Yale University. In 2016, Cal left a top California law firm to start Gresham International, a compliance and strategy firm specializing in the cryptocurrency space.

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