Crypto projects failing is not fatal for the industry: Grayscale

Grayscale Investments researchers have noted in the company’s latest market outlook report that despite the price declines and collapse of some crypto projects, the industry remains strong.

An on-chain analysis overview across the ecosystem shows the failing projects have not impacted the growth trajectory of Bitcoin (BTC) and much of the market.

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Grayscale researchers Matt Maximo and Michael Zhao wrote in their July report dubbed ‘Bear Markets in Perspective’ that despite price fluctuations, for instance, Bitcoin’s underlying network remains robust and “operates as designed.”

According to the analysts, short term investors and weak hands are likely to focus on price and risk missing the growth being witnessed in the space. On the other hand “seasoned hands” know drawdowns of as much as 80% are expected as part of the growing pains for the nascent asset class.

Not ‘dead’

Bitcoin has been labeled pretty much everything and pronounced dead, Maximo and Zhao noted. However, up to the current bear market cycle, each one of the previous ones have only seen  the ecosystem emerge even stronger.

It happened in the 2012-2015 market cycle where drawdowns of 80% ensued following events around the Silk Road, China’s ban on Bitcoin, and the infamous Mt. Gox hack. But that did not stop growth and the emergence of Ethereum (ETH) and the initial coin offering boom helped push prices higher.

The bad news came in 2018 and once again Bitcoin was ‘dead’ as capital flight ensued. However, in 2020, the decentralised finance (DeFi) explosion and institutional investor entry alongside easy money during the pandemic triggered the upside that had BTC striking highs of $69,000 in November 2021.

In between, leverage and the TerraUSD (UST) experimentations among other weaknesses once again helped push the panic button. The turmoil that followed has hit the DeFi-focused centralised finance (CeFi) firms hard, with massive price declines again witnessed.

But these latest failures, the Grayscale researchers point out, will not be fatal to the industry. Rather, it could prove another crucial growth phase.

This market cycle has already provided us with battled-tested DeFi and infrastructure protocols, innovations in scaling solutions, a growing metaverse industry, and more. Despite price declines, liquidations, and volatility, the crypto industry continues to build and innovate, pushing the boundaries of what is possible.”

Matt Maximo, Research Associate & Michael Zhao, Research Analyst- Grayscale Investments