Crypto Winter – Lessons From 2018/19

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  • The 2018/19 crypto winter was brutal, with recognisable names forced to cut back
  • Many took action too late, believing that the bear market would be short
  • These same companies are taking action now, and smaller ones should follow suit

The 2018/19 crypto winter is a distant memory for those who were there at the time, although the memories look like they will soon come flooding back as crypto history looks to be repeating. While the types of projects that will implode or exit scam are different, the narrative is the same, with DeFi platforms and NFT projects replacing ICOs and small exchanges. This time round however it seems that several projects and crypto companies that lived through the 2018/19 crypto winter have learnt from their experience and have taken steps to mitigate against the slow, grinding death that can creep up on those that fail to prepare. While unpleasant, this is the only way to survive a crypto winter.

DeFi and NFT Projects Will Feel the Freeze

The 2022/23 crypto winter will see decentralised exchanges, DeFi lending platforms, and NFT projects get their first taste of life in a bear market. Many will simply see their income killed off, while others will mismanage what they have left and will implode. Others will simply rug pull and run for the hills while the going is relatively good.

The situation is similar in many ways to the 2018/19 crypto winter which came on the back of the 2017 ICO boom, a boom that saw almost $5 billion handed over to brand new, untested projects to build their software. Unfortunately, the less prudent ones didn’t cash out in time and saw their funds trickling away as the crypto winter ground them down, leaving them with no choice but to fold, wondering what could have been.

Today’s Big Players Learnt Harsh Lessons

In 2018/19, big players such as mining rig maker Bitmain, which was tied to the Bitcoin Cash project following the 2017 hard fork, failed to cash out. Bitmain lost some $740 million in 2018 as a result, leading to it laying off its entire Bitcoin Cash Go client development team at the end of the year.

Elsewhere, ShapeShift let 37 people go in February 2019, three months after smart contract auditor Hosho cut its workforce from 37 to just 7. Similarly, Dash and Ripple fired senior staff to try and reduce their outgoings. Huobi shut down its Australia office in a cost-saving measure, while smaller exchanges that boomed in 2017 mismanaged their funds and collapsed.

Even Ian Balina, the king of the ICO in 2017, showed that success in a crypto winter was much harder than success in a bull market, with or without a spreadsheet.

Projects Need to Take Steps Now to Survive the Crypto Winter

We can see the lessons learned in 2018/2019 bearing fruit already. Many of the companies that were around at the time have learnt from their mistakes and have taken steps early to protect themselves early on – Coinbase, Kraken, BitMEX and more have announced job cuts. Others who weren’t around, such as and BlockFi, have seen the writing on the wall and taken similar action.

Smaller, newer projects should take heed of what is happening and act now. In a bear market there is practically no money moving through the system – everything freezes over, and only those who manage their resources will survive.

It may be unpleasant, but pruning back for the crypto winter is the only way to prepare for the spring, and the sooner it is done the healthier the bloom will be.