Crypto bear market: what it means for the Web3 ecosystem

Transcript

what's up friends welcome to web3 academy a place for entrepreneurs creators and marketers to explore and learn how to use web 3 to transform business models and create thriving communities enjoy this next episode [Music] gmgm welcome back to another web 3 academy podcast it's kyle read head here today my final episode in nicaragua after this i will be off to permissionless in miami uh at the permissionless conference where there's going to be some of the top speakers uh and founders and writers and and um and others from the the web 3 and crypto space we'll be speaking there so i'm excited to take in that information and uh and i'll do my best to distill it and share it

all with all of you throughout other podcast newsletters etc if you're going to be there hit me up let me know i'd love to to chat and meet with the web3 academy community now this episode today is called crypto bear market what does this mean for the web3 ecosystem it's been a rough week well it's been a rough few weeks maybe even months i i guess and in webtree academy we don't typically talk prices you know we try to stick to just the utility the business aspect of it how can we build and create value um but obviously uh we're we're impacted heavily by um by the markets and uh and a lot has happened in the markets uh in crypto and

outside over the last little while and i just thought i would um i would do this podcast because um i want to give some insight into what's happening and some insight into what you can do to ensure that whether you're building a business you're working for a business or you're just investing ensure that you're in the in the right direction and doing the right things not that i have a crystal ball and i can tell you exactly what's going to happen but i think i can just give a another look another thought hopefully you're you're you know listening to other podcasts and reading other newsletters and i just want to give you another take um and so why don't we just dive into it here i'm

going to read an article that i wrote um you if you want to check it out in the show notes you can find the name of the article and or sorry the link to the article and you can give it a read um but i will also be reading here and providing some more uh some more context so without further ado let's get started so let's start this week discussing the elephant in the room crypto is down bad the charts show nothing but red so are we doomed was web 3 just a fad was this really for nothing let's be real you know most of our investments are down 60 to 80 plus percent uh since november of 2021.

if you were an investor in luna you are down 100 unfortunately but this is about much more than investments right the web through academic community are a bunch of doers in a space which means many of us have been impacted in many different ways maybe you work for a web 3 company if you're building a web web3 company maybe you have web3 clients maybe you get paid in crypto right at web3 academy we don't typically talk about prices but naturally the entire ecosystem the web3 ecosystem and crypto ecosystem are impacted systemically from price so in today's article and in this episode here we're answering the question what does a bear market mean for the web3 ecosystem and how can we weather the storm it's a tough tough

question uh to to answer so first of all we need to understand that what is happening right now in the markets is not just a crypto problem i mean if you're heavily invested in crypto or you work for a crypto company and you don't look at other markets or you don't really care about investing you probably think this is something going on with crypto but in fact it's a global monetary problem that is occurring across all markets okay equities crypto even gold and many other um assets right now are all tanking right big name stocks like netflix are down more than 70 in the same time frame okay others like peloton robin hood and open door are down even more right 80 plus it's an absolute mess out

there so let's take a second just to recognize that crypto is not tanking because of a problem in crypto okay and as i wrote this article uh and as i'm reading this today even um ust you know tara's algorithmic stablecoin lost its peg to the dollar and luna and its ecosystem imploded we talked a lot about this in our episode last week in the weekly roll up if you want to learn more check that out um this was big and it definitely has some contagion effect across the broader ecosystem which we're still learning and understanding today but overall this is not the reason where why we are where we are right now right this isn't the reason why we've been going basically down for the last six months okay it is

a reason why we had some issues last week there's no doubt but it is not the entire reason of why we are here in fact crypto and web 3's fundamentals are actually better than ever right the space is growing in terms of adoption faster than the internet itself did at this point it's almost double it's almost growing at the rate of double what the internet was at around this many this amount of users which is somewhere between 200 and 300 million users in total so it's growing at double the speed now will it always stay that we don't know but that's what we're seeing right now so the fundamentals of crypto web 3 are incredible okay but crypto is tanking price wise because of the macro environment which

i'm going to outline briefly below i'm going to outline this because i think it can help us to understand how long this might take and then dive into what this means for us in web 3. now i'm not a financial expert so please do not take this as financial advice okay i'm not a macro investor or expert by any means however i am lucky enough to be working with some of the top financial experts in macro and in crypto which is one of the benefits of what i do and so this gives me kind of an inside look into what the pros are saying and thinking about this space and about the broader macro environment okay it allows me to share this info with you so just a quick disclaimer chris crypto is risky and you could lose it

all uh ask dokwan if you don't believe me is it too soon that's just what i wrote in this article uh that's a tough one and um but it's true it shows you like look this stuff is very risky right we just saw ust and luna go from 40 billion dollar market cap to basically nothing so this stuff is risky and you actually can lose it all unless you're doing the right things so why are all markets tanking this is very important for us to understand i'm going to do my best to break this down extremely simplified terms for you to understand so if you're not someone who looks at markets normally that's fine don't worry i'm going to do this simple for you but understand that there's some very serious complexities here um and so what

i'm going to say is just a simple version okay so markets are tanking for the following three reasons one inflation is at highs we haven't seen in 40 plus years right so what this means is people have less dispensable money to put into investments number one so that's one reason why um numbers go down but also we think about this in the real world we also have less dispensable money to purchase goods in the real economy right this is why we're seeing people are cancelling their netflix accounts right and the reason is doing this because they need to pay double in gas right most people are living paycheck to paycheck and they don't have a lot of excess capital if you have a lot of money you've been investing for a long time

inflation might not impact you that much most people in the world which is what moves our markets this impacts them a lot and they have to find ways to reduce expenses in order to cover these much more expensive costs right and so inflation is high because well one we printed trillions of dollars in the last two years and so of course we knew that inflation was coming but it's also reaching these numbers more than we thought more than the fed thought because of supply chain issues one with kovid and now secondly with the war that's going on in ukraine in russia okay so there are additional impacts to what's happening with inflation that are

sort of outside of what the fed had predicted those that are controlling the the monetary policies so number two interest rates are rising this is one of the monetary policies that the fed has control of so to fight inflation the fed needs to make it more expensive to borrow money right by raising rates it discourages borrowing and encourages saving thus slowing down the economy and decreasing inflation so what the fed's plan was when covet happened of course there were supply chain issues but they said hey let's print money let's get help everybody out that is stuck and can't can't work and can't do whatever right and they realized basically what their thought was well once we get that back to normal hopefully this doesn't take so long supply chain issues get fixed people go

back to work and earning we can start to raise interest rates and bring and hopefully control inflation and we shouldn't be impacted so so much well they didn't predict that there would also be a war that is going to impact supply chains all around the world and that china is currently shutting down their economy again due to covet who would have predicted it would have gone this long so it's the fed's doing what they can but there's a lot of other issues at play here and so finally the third reason here is that the u.s dollar is rising right so they call this the dollar wrecking ball which means when the dollar goes up assets go down it's really as simple as that so why is the dollar going up well because people are selling assets

due to inflation and raising interest rates we see what's happening in the in the economy so people are scared and they need their money so they sell assets like gold and equities and crypto and whatever else and where are people going to hold their cash most countries are going to do it in the us dollar because it's the strongest of all of these currencies so all around the world not just americans people are selling into holding the us dollar and when people companies and nations sell their assets they flee into the world's strongest currency when the u.s dollar goes up it impacts everyone around the world because it's more expensive to trade right importing and exporting changes so it has impacts that go globally throughout the world

so what happens next well really this is the million dollar question and no one really knows and there's a lot of debate here okay i don't know the exact answer to this one thing i highly recommend you do is watch raul pal's macro master class okay for a deep and timely understanding um this is if you go to the show notes and in this article you'll see a link to it it's on youtube it's free um but uh he does just a really nice hour and maybe 20 minute breakdown of what's happening in the world and kind of how he sees this playing out now there are many scenarios as to how this can play out but the scenario that's happened for the last few decades multiple times over and over is the following and this

is basically what raul lays out in that master class for you so what happens is the fed or the federal reserve which is you know that one central organization the united states which decides if we all be rich or we will all be poor every single year unfortunately basically they control the money okay and so the fed in times like this it begins raising rates interest rates to fight inflation and whenever this happens the markets tank that's what's happening right now consumers end up as a result spending less and companies start laying off staff that is also happening right now we're seeing this in many companies and probably a lot more to come growth ends up slowing because people

are not buying things and the economy starts to sink into a recession this is already happening in europe and i believe in china as well and the usa is not far behind they are about to be announcing that they're in a recession very soon so what happens when this occurs that the fed then decides they can't keep raising rates and they reverse course meaning they stop raising rates and they end up starting to lower rates that doesn't happen all at once so don't expect that to happen right away but you'll start to see their tune typically change maybe they'll go on pause for the next meeting and then they'll you know they'll start to go back down and i'm not saying that happens immediately they might continue to raise for a little bit longer we'll see

the fed also then decides once we're into a recession that they need to stimulate the economy right to get it out of recession and get things moving again aka the money printer goes burr we've all heard that in 2020 2021 uh we've seen the memes of jerome powell with the money printer just wheeling it and money shooting out that typically happens and it's been happening a lot for the last few decades and so when that happens we see the same thing the us dollar begins to fall and assets go up this is what we saw happen in 2020 right and then a rinse and repeat assets go up inflation occurs we've got to try to fix this and so we've got to raise rates and stop printing money and we just keep going through the same scenario okay long story short the fed won't or

can't let the financial system implode it would literally blow everything up this is why they can't just keep raising rates like everyone is saying they're going to do so the idea is they have no choice but to stop raising rates and stimulate every time something crashes okay to stay to say they are stuck between a rock and a hard place is to say it very lightly essentially they need to decide between letting the global economy implode or and continue to inflate the world's reserve currency and make our hard-earned dollars and savings worth less now this happens in a lot of countries right we've seen this in venezuela and zimbabwe argentina it's been happening recently i mean we see it in many different countries russia you just saw turkey is happening right now it's all over

governments are just kind of inflating away their currencies part of this because they have to pay back their debts and this makes it cheaper to do so but also it's just something sometimes what they need to do because they will choose to save the global economy from imploding every single time every single time and honestly most of us probably want that as much as it sucks on the other side of the scenario of inflating away our money so how long does this take to play out well again this is another million dollar question and we don't know the answer but with each one of these cycles it seems to happen faster and more aggressively every time those i've spoken to say that higher inflation from the war in kovid plus raising rates has sped this process up

like crazy now the expectation is that by summer the fed will stop increasing rates and soon thereafter begins stimulating the economy now i just want to point out here this is not consensus okay this is not what the markets are pricing if this was the actual expectation of everybody markets would be going up but right now markets are saying that they are scared and that's why everything is going down people are selling okay but the people that i've spoken to they believe the markets currently have it wrong or they're just slow to figure it out and they're starting to see indicators of this happening i'm not going to get into what those are because that's just way too in-depth and out of my out of my scope

so what i'm saying is i'm on team fed saves the day i believe the fed is going to help everyone out because that's what they always do right so what i did is when i hear okay well this is uh you know the expectation is by summer that the fed will stop increasing rates i'm looking up when's the first day of summer and when i looked that up it says june 21st okay so maybe one more month i'm kidding it's obviously not that black and white but here's kind of the situation to give you a bit of an insight if these insights are correct we have until maybe the end of june or july right let's give some wiggle room here until the markets might begin to heal okay it's also very possible that this continues for much longer and things get much worse

at this point nobody really knows except for maybe the fed but not to mention with the collapse of of tara luna the last week and its contagion effects still unfolding it's anyone's guess as to when we see the crypto market specifically begin to trend higher i'm more on the optimistic side though uh not just because i think what i'm hearing of what the fed's gonna do and kind of just if we look at trends of the past um i believe that's one of the reasons i also think you shouldn't fade the eth merge coming up in the next couple months i think it's going to be huge for the crypto space and i think that will do a lot to help um the ecosystem get back on its feet after everything that's happened over the last little while but we'll talk more about that in another another

episode maybe so what does all this mean for the web3 ecosystem right like any industry when we fall into a recession and consumers have less money to spend while business is impacted okay in the traditional world most businesses deal in u.s dollars right or any fiat currency doesn't need to be u.s but businesses typically their treasury or their savings is in usd they pay their employees in usd or fiat their capital investment is in usd right if they raised they typically get that in usd and they sell their products in usd right so in some cases us dollars going up might not be the worst case scenario for some businesses it's still challenging but it's not as challenging

however on web three things work a lot different okay in our ecosystem everything deals in tokens right or assets and so the difference here is that when markets tank like they are now we don't just have the problem of less consumer spending it means our treasury may have just tanked by 60 to 80 plus percent versus the us dollar it means employees salaries may have just taken a hit it means our capital investment might be a lot less than it once was right so whether you're involved in web 3 in a web 3 native company like adap a dow an nft project or maybe you're providing a service for any of these types of projects price action makes a big big difference the other issue is that web3 companies

need continued adoption of new users entering the space to sustain and grow when prices go up we have no issue bringing in new users right it's very easy when people see heath and bitcoin and whatever going to the moon people want to join in they're like what's this thing all about so it's easy to get new users plus when everyone has fomo and they're all excited and it's a bull run people they want to get in they want to get in on anything so it's not it's not very difficult however when prices go down not only do we have a limited number of new users we also have existing users who lose interest and leave unfortunately because this industry is so new and experimental it still heavily relies on spectators as users for one my marketing agency we work with

a lot of crypto clients okay newsletters and media platforms etc and when prices go up uh their revenues go up they see a lot of new users and that's because more people are entering the space and when new people enter the space they start using the products or they start wanting to learn about the products through newsletters and other platforms engagement goes up right people if you look at like youtube influencers and twitter influencers and even look at all the companies that have twitter accounts during bull markets when price goes up all of their numbers go up because more people are coming into space when numbers go down people start to leave the space and there's not many new people entering the space it's very

different in this web 3 and crypto world versus normal markets right where everyone's already in that space they just might not be buying that product yet it's very different here okay and so in summary at the moment the web3 ecosystem relies heavily on the markets which means that currently a lot of projects workers founders they're hurting okay many will not make it until the next bull cycle even if that's just a few months away and that's just the unfortunate reality and so the question is how do we weather the storm how do we make it how do we make it through well i believe that in difficult times we need to get back to the basics we need to forget about going to the

moon the potential of things and the speculation of things which just gets absolutely crazy in bull runs and remember that at the core of this whole thing we are just building businesses right albeit they're in very different ways using very different tools we are still just building a business and so whether you're investing in a business and all of these tokens all of these nfts they are some form of business okay they might be a new form of business like a dow or an nft project which is a community-based thing it doesn't matter it is a business okay and so whatever you're doing working investing you have clients of any of these things just like any business that business needs to provide value

it needs to solve a specific problem it needs to improve people's lives if the business does not do this then i'm sorry but it likely will not make it through tough times it's as simple as that there is a lot of garbage in this space of crypto and web 3. okay there's a lot of people saying they are going to build things that they are never going to build and the reason i know this is because we've seen it many times in the past we saw it in 2017 with icos we saw in 2000 with the tech boom right with the internet the dot-com boom there was a million different internet companies most of which don't exist today and it's not because the internet was the wrong choice and the internet wasn't

going to make it the internet has obviously done incredibly well in the last 20 whatever years right but there's just a lot of people who got all hyped up and had the fomo and just said we're going to build this thing and a bunch of people bought into it and it went to zero and that happens in crypto and web32 okay the problem with bull markets is that any product or business can succeed because it's all just hype that's it once snoop dogg tweets about it you're going all in that's the way this industry works and not just this industry all industries that do this anytime you get into a bubble right or this crazy bull cycle people get these dopamine hits and they get say it's addicted to it right and they

start doing irrational things and if you just think back to 2021 there was a lot of irrational things happening in this space okay but when the dust settles and the party stops the projects that will make it out the other side are the ones which did the following they built for long-term sustainability rather than hype and incentives most products are not building for long-term sustainability especially ones that have tokens okay a lot of them are around hype and incentives and they require the hype to continue to go up or they require giving incentives to people for them to continue to use the product and as soon as that stops the money stops that token price that project it's going to stop and again we

see this all the time so those that focus on building long-term sustainability those that create real value and utility and solve real problems for users okay it's all about solving problems and yes the ux of web3 is not great and so those who start creating good ux for web3 that's going to be a pretty big pr pretty uh nice problem that they solve but if you think about web 3 and crypto what's happening even though the ux is so bad it is so much worse let's say to try to hold your own keys uh and your own tokens for let's say your eth or your bitcoin than it is to you know keep your money in a bank or to buy a stock right to invest in yet people still do this and why

because there is real value in eth and in bitcoin and in other projects there's real value in what a blockchain does for people especially people that are in countries that can't get access to banks right and that's not all of it there are many other utilities and value that is provided by these tokens i'm just saying there are some people who just can't use banks so even though the ux is better crypto solves a real problem for them right and so this is what i mean by solving problems so long as you solve a problem it doesn't matter about the ux or the hype right none of that stuff matters because people will do it because they just want their problems solved this is how markets and economies work this is how business works

right so you need to solve problems and look for projects that are doing that okay and just because it's uber on a blockchain that doesn't mean that it solves a problem right we have uber uber works just fine does uber on the blockchain work better i don't know we'll find out i'm sure someone's going to build it but it doesn't mean that it does okay got to think about is actually solving a problem what is the problem with people that use uber if you can figure that out and this web 3 version fixes that okay then maybe it has value okay and the third thing is are they focused on creating a strong community the other thing to remember that in this space is unlike web 2 it's very easy to just sell and get out of that investment or sell

and get out of that dow or sell and get out of that nft project and so whether you are helping any of these do marketing or you're helping any of these with design or you are a founder of one of these et cetera people can come and go very easily but if you create a strong community people will stick with you through the hard times and so if you have a strong community you probably haven't done so bad during this downturn over the last six seven months right now bad is relative because i'm sure it's still down a lot but it makes a big difference when you have a strong community and so those that are focusing on strong community this is very very important in web3 so at this moment whether you're a

founder you're a builder you're a worker you're investor you're a developer whatever you are you should ask yourself if the projects you're involved in fit the the criteria above and if the answer is no then now is the time to make moves find yourself a new community get involved in a new project start a new business right find new clients alter your investments whatever it is that's going on now is your opportunity to one take a look and see what's out there and what has made it through or is still thriving right who's which projects are still building during this time which ones still have a community okay now is the time that you actually can see which

things are working this is a good time for builders for founders investors etc because now all the hype's gone all the phones gone all the fake stuff is gone and now you can see what's real and what's not if the answer was yes then now's the time to dig even deeper work harder double down right on what you're doing if you believe in that what you're in is the future then keep going good on you this is exactly what you need and now is your chance to sort of double down on that if it's investing well now you can buy in at a discount right if it's working well now you can maybe get um another roll without that company okay or you can get a second job if you need it right i'm sure there's

people high well i mean there's tons of people hiring right now in this space just remember quality always wins in the long run and it seems that people in crypto people in web 3 they need to be we need to be reminded of this frequently and i don't say it's just other people it's myself as well when the hype is there we all get caught up in it right but just like we've seen in three different cycles in crypto we gotta flush out all the garbage right this was what happened with the tech boom as well so i finished this off with a question are we all going to make it wagmi right a common theme and a common slogan in the web 3 crypto world and my answer this is no

unfortunately we are not all going to make it sure this goes against the popular narrative and the popular meme of wagmi but let's be real here guys we are reinventing the internet and creating permissionless open and transparent markets free markets okay where business and human interaction is free from government intervention or centralized control so i'm sorry but in a free market there are always winners and losers that's the entire point right so absolutely not we are not all going to make it crypto is going to make it web 3 is going to make it i can guarantee you that but are all the projects that are currently in this space going to make it hell no probably

95 to 99 of them are not going to make it and that's just the reality that we live in and that's not a bad thing that's just the way markets work and so the sooner the this industry understands the that fact and realizes that in order to make it we need to create real long-term value that solves problems for people well the sooner we can get back to delivering the true promise of web3 okay which is a fair and equal internet for the world that's what we want here but it doesn't happen during these bull markets when people go insane so my final thoughts is this look web3 is a once in a lifetime opportunity it

is exciting okay there's no doubt about it i am literally obsessed with it it's all i do but it's also very consuming for many and the nature of this industry is very addicting because everything is an asset and it has a real time valuations doesn't exist in any other market right which this can really impact our thoughts and our mental health and i know that right now with prices down and probably projects closing and maybe you're losing clients or you've lost some money it sucks it is not easy but you are not alone here there are many of us that are going through the same thing but we need to recognize that there's a lot more to life than money and technology in times like this it's very helpful to unplug and focus on things outside of money if you're struggling my best advice is

to journal okay write down your thoughts write down how you feel uh write down why you're feeling it write down what you did okay and i recommend this because next time the market tanks by fifty and it will i promise you that you can revisit your past thoughts and learn from them okay some of the top investors and entrepreneurs in the world recommend this practice something i've used outside of just business but many times in life and has very much helped me and i would highly recommend that you do this as well friends i hope you stay strong we will get through this and we will come out on the other side stronger but it doesn't mean everything's going to make it we're not all going to make it we will as people right because there's more to life than just this

stuff but everything we're in and what we're doing is not all gonna make it unfortunately well that's my rant guys and i hope that this was uh this was helpful um as i said i'm not a financial expert by any means but i do follow the markets quite heavily uh i am involved and um speaking with many people who are as well i also and of course consuming a lot of content in this space um and so i just wanted to to share my thoughts and just my understanding of what's happening um with the rest of you um because i understand that we are all impacted my business is also impacted right now and we are rethinking our clients and rethinking what we're doing in our

business model and it's a time to reflect and learn and and and then grow and when the markets start to go back up which again they will at some point um it means really good good things for you if you are in the quality projects whether again that's investing or working on or whatever at some point there's going to be a big influx of money a big influx of users coming into the space and we will all benefit from that so long as you stay in it and you continue in this and you just keep working and keep trying to find the quality projects to be involved in okay so listen if you enjoyed this if um you have questions then please join our discord

and hit me up and let me know what questions you might have let's have a conversation around what is quality projects which are the projects that are doing the stuff the most this is what i hope to have with you guys over the next week inside of our discord which by the way our discord is now a token gated community don't worry it's free um but basically what you have to do now to get inside of our discord and if you were already in it and you haven't done this you also need to do it but you need to fill out an application and this just helps us understand who is in the discord so that we can one create better content for you but two cultivate a community of the right people uh and make sure that everyone is getting what they need inside this community so you

fill that application within 24-48 hours you'll receive an email from us with a link to claim this nft and once you claim the nft you can join the discord and verify it and it will open up all of the channels we have and there's channels where you can talk about the news you can talk about nfts you can get help on your business you can talk about marketing there are developers and marketers and founders and a bunch of others inside of this this discord and ideally you can get everything you need inside of the web 3 in business world so i hope to see you in there please reach out and let me know that you listen to this and i hope that you all have a wonderful week and um and can weather the storm together thank you and take care

everyone thank you for listening to web3 academy we hope this helps you along your web3 journey if it does please share this episode and subscribe so you don't miss the next one by the way if you have yet to join the discord community you are missing out this is where all the magic happens this is where we learn where we ask questions where we network uh you want to be in there the link to join is in the description below and finally a quick disclaimer nothing in this podcast was financial advice crypto and web3 can be risky you can literally lose it all in fact if you invest on account of what we say you probably will lose it all so don't do that in all honesty the point of this podcast is to remove the noise of markets and price and focus on utility and implementation anyway so you

should not take any of this as financial advice thank you friends and see you in the next one