Crypto is crashing again. Will it come back?

You’ve seen this movie before. Or at least you know the plot: a new technology is starting to catch the eye, baffling those who doubted but exciting its fans, who promise to change everything. A wave of exaggeration and speculation raises it in the public eye, culminating in Super Bowl announcements that make the new technology seem completely popular and appealing, though still confusing to most normal people. Then the shock.

So yes. This was the first web bubble, in the 1990s, to appear in March 2000.

It also looks like it’s happening with crypto and / or “Web3” (the recent crypto brand change) right now. Over the last year, your friends who know nothing about technology have noticed NFTs, even if they can’t tell you. The 122 million people who watched the Bengals-Rams Super Bowl in February also saw ads from previously obscure cryptocurrency companies, such as FTX, backed by a celebrity with no obvious connection to the product. Label line: “Don’t miss the crypto”.

And now the fall: something like $ 1.5 trillion worth of value has been missing since last fall as cryptocurrencies have plummeted: Bitcoin is down 56 percent from its November high; ethereum has dropped 63 percent. Don’t even ask about Dogecoin. Even venture capitalists Andreessen Horowitz, perhaps the most prominent proponents of cryptography in technology, admit that we may be entering a “cryptographic winter.”

Rani Molla

The big question for everyone who has invested in crypto so far (institutional investors, founders and start-ups and average people who bought a bitcoin or a digital cartoon monkey) is whether things are different this time around. We don’t have an answer yet.

There are many arguments on both sides. Here we have to keep in mind that crypto bulls strive to distinguish between blockchain, the technology based on a global network of computers that talk to each other and record transactions, and cryptocurrencies, the assets that this technology often generates. In theory, interest in the blockchain should not be tied to the price of the cryptocurrency; in fact, it is very much so.

If you believe that cryptography is falling along with the rest of the stock market and the technology market specifically, you can point to data points such as falling NFT prices. Or “downward rounds” of investment: private companies that are forced to raise money in bids that value their company for less than they were worth just a few months ago. This may be happening in BlockFi, a crypto trading platform. Less than a year ago, the company thought it was worth $ 5 billion; now investors are telling the company that it is worth $ 1 billion.

Or the fact that other cryptocurrency companies, including Coinbase, one of the cryptocurrency companies that splashed millions on a Super Bowl ad a few months ago, are making frozen contracts or even layoffs.

Meanwhile, some workers who were eager to leave their Big Tech jobs for Web3 startups a few months ago may be thinking about them. An executive at a private company without cryptography tells me that it has been much easier to recruit people like Google and Facebook than earlier this year, when everyone was targeting cryptography.

There is also a change in the general environment: a year ago, it was difficult to find many technology people willing to spend time publicly criticizing cryptography and the Web3. There are now a growing number of them, of Box CEO Aaron Levie to software engineer Molly White, who runs a site dedicated to cataloging the work and bugs of crypto and Web3 (I chatted with her recently at Recode media podcast.) See also: Joy in headlines like “Someone stole the boring ape from Seth Green, who was supposed to star in his new show.”

But if you believe that cryptography is going nowhere, you have your own data points: while Andreessen Horowitz talks about dark times in the near future, she has also just raised a $ 4.5 billion fund explicitly for investments in cryptography. That money has to be spent somewhere, and there are still a lot of cryptocurrency investments: Katie Haun, a former federal prosecutor who became a cryptocurrency investor and raised $ 1.5 billion earlier this year, just announced a new deal this week.

And yes, some people may be tired of cartoon monkeys. But that doesn’t mean they’re tired of NFT. One thing called Goblintown is the new heat, people tell me they spend time in this space, while I nod, though I have no idea what they’re talking about.

Meanwhile, Gary Vaynerchuk, the marketing / self-improvement guru who loves nothing more than the Next Big Thing, recently hosted a four-day VeeCon event on the floor of the Minnesota Vikings Stadium in Minneapolis. The only way to get in was to buy a NFT Vaynerchuk, and he tells me that about 7,000 VeeFriends owners showed up.

And a lot of people I talk to on Web3 and crypto insist that things aren’t as serious as they seem, and that they’re used to the prices of cryptocurrencies fluctuating wildly. It would be weird for them to tell me otherwise because they are bought. But that doesn’t mean they can’t believe it.

“This has been a cycle that has been widely talked about as a cryptocurrency failure. But when you’re in it, you don’t feel like it,” says Jarrod Dicker, a technology entrepreneur and executive who is now a cryptocurrency investor for the Chernin Group, an investment firm. specializing in media and technology. “I think a lot of these companies that are building or starting to build, have raised their capital, they have their three- to five-year plan, and they’re doing it.”

For now, at least, cryptography is still something that many ordinary people are interested in, for better or for worse. Brandwatch, a social media sentiment analysis company, says the social mentions of “crypto”, “NFT” and “Web3” have remained mostly positive over the past 12 months. According to Data.ai, download rankings for crypto trading applications have also remained fairly high.

Rani Molla

But if we’re drawing parallels between now and the Web 1.0 bubble, it’s important to keep in mind that it didn’t deflate completely during the night of March 2000: it took a couple of years for all the dot bombs to explode. more stupid.

I was at that point, and I remember that the decline could be measured by the way the successive waves of layoffs were handled: the people who were fired for their point-com from the beginning received good compensation packages. (I remember several people telling me they were going to spend their “fun” payments on cooking school). But successive rounds of layoffs became less and less generous, and when companies closed their doors for good, employees had nothing because there was nothing to give them.

So even though I hate this coverage, I’ll do some coverage – we won’t know how bad and significant the cryptographic collapse is for a while. In the meantime, one of the things you hear from Web3 believers is that it would not be terrible for lame cryptographic companies to leave and leave the good ones intact. In this scenario, his company is Amazon, which survived the dot-com crisis and became … Amazon; other people’s lame companies are theGlobe.com, a flagship-like flagship that now only exists as a Wikipedia entry.

“Every cycle, when there’s a big bankruptcy, I think people who are building in silence are pretty ecstatic because a lot of the noise is removed,” says Tina He, the Web3 entrepreneur I spoke to earlier. this year when I was testing. to get my head around the hype.

She’s still building something called Station, which she hopes will be a LinkedIn for crypto workers, and she says she has a “super skinny” team of six workers and “a lot of track”. On the other hand, he says, the fact that other Web3 teams may be struggling will affect their project, which means there will be many Web3 projects and employees to follow up and connect with each other. So it can’t last forever without new money.

“We’re actually quite optimistic and idealistic about our progress,” he tells me before acknowledging that he may need to organize a “bridge round” to achieve a more lenient funding climate. “Even without that, we could last all winter, if the winter lasts less than two years.”

Rani Molla contributed to this story.