Here’s Why One Crypto CEO Thinks Bear Markets Are Actually Good

Bear markets are part of investing, especially in crypto. While the stock market was mostly on a bull run until late last year, ever since the Great Recession, there have been a handful of periods where cryptocurrencies have gone through their own bear markets.

When this happens, it’s called a crypto winter, and it’s not uncommon for the cryptocurrency market class to collectively drop more than 60%. In fact, in the last crypto winter of 2018, the cryptocurrency asset class was decimated, losing more than 80% of its value.

Despite this extreme drop, the market recovered over the next three years and rose to new highs in 2021. From the bottom in 2018, the cryptocurrency market capitalization increased by more than 2,500%, reaching a total value of just under $3 billion .

One crypto boss hopes that another similar situation may develop. But a few things have to happen first.

Been there done that

Ryan Selkis founded Messari, a cryptocurrency research and data analytics company, in 2013 when the asset class was in its infancy. The idea of ​​creating an easily accessible and intuitive platform for users to explore cryptocurrency charts and trends has helped the CEO become one of the industry’s prominent figures.

As a seasoned veteran, Selkis has been through his share of crypto winters and bear markets. He believes this one is similar to others since it came after a period of rapid growth – too much growth that happened too quickly.

Selkis believes that a little turbulence in the market is healthy and necessary to stimulate the next bull market. When bear markets arrive, companies and blockchains that struggle to provide real utility inevitably go bankrupt. To ensure that they can remain competitive, blockchains must either re-strategize or further evolve their ultimate visions so that they do not become obsolete.

As Selkis put it, the arrival of crypto winters helps “wash away all the dead wood” and make room for new competitors. He further elaborated that “bear markets are good for getting the right people in the room” so they can help lead a new wave of growth and innovation.

If the current crypto winter is anything like the past, investors should plan a few things.

Lessons to learn

First, not all cryptocurrencies around today will make it to the next bull market – if one arrives. Looking at the top 10 cryptocurrencies by market capitalization as of June 2018, arguably the middle of the last crypto winter, only four are still in the top 10 today.

The natural success process eliminates blockchains that fail to evolve and provide the necessary utility. Investors should prioritize holding cryptocurrencies such as Bitcoin (BTC -0.73%) or Ethereum (ETH -1.55%)that are built for the long haul, have a proven track record, and are not part of a short-term trend.

Additionally, if past bear markets are anything to go by, recoveries are a long-term process. It took nearly three years for the cryptocurrency market to peak from its dismal low in December 2018. We’re not even a year into the current crypto winter, but there should be no cause for concern.

Instead, investors should use this time to build their positions and remain consistent in their allocations. If the past is any indication of the future, a bull market should return. Of course, nothing can be explained with certainty. Still, the growing trend of blockchains and cryptocurrencies permeating business models and people’s daily lives is hard to ignore.

While the technology continues to evolve, an investment in specific cryptocurrencies that foster innovation can be of tremendous value if the market begins to recover. Keep the big picture in focus and stay consistent. Prioritizing your investments in blockchains that provide real utility is the best way to position your portfolio for success should this crypto winter thaw.