Crypto’s Boom Bust Cycle – only it’s different this time.

Earlier in June, we saw Bitcoin’s price tumble more than 70% from its peak of USD66K and we’ve mentioned that the recent crypto crash is not a crypto problem but rather an over-leveraged problem seen in traditional finance. 

Last Wednesday (29/06), Momentum Academy hosted the “Web3 – The inevitable next step” event where we further mentioned that the recent cycle bore some resemblance to the 2018 meltdown, albeit with a much larger magnitude. 

In 2017, Initial Coin Offerings (ICOs) – the crypto industry’s equivalent of an IPO – were a popular way to raise funds without giving up equity. Lots of liquidity flooded into the market as investors rushed into cryptocurrencies and random companies started pivoting toward blockchain without fully understanding it. Once the realisation hit that most coins were actually worthless and had no real value, the bubble burst.

While the current environment is still quite speculative, it is now much more diverse. Apart from cryptocurrencies, Web3 boasts various use cases for the Metaverse, NFTs, GameFi and DAOs. If crypto came up in conversation a year ago, what would you think, as an informed investor? You would be skeptical. Even I thought it was pure speculation. Now with the emergence of NFTs, use cases, though not mature, could give some interesting perspectives about what might come in the future.

Further, during the Covid-19 pandemic, many individuals had time on their hands and started exploring Web3 projects. Even Facebook changed its name to Meta in an attempt to spearhead the push towards the Metaverse. Ownership of digital assets will eventually be thought of as commonplace in the future.

With inflationary pressures reduced after the crash, real use cases will start to be developed as speculation reduces. There will now be time to think about the opportunities in Web3. Actual cash flows will be built around Web3 products – offering services and tangible products. 

For example, GameFi companies, like Sky Mavis with its product Axie Infinity, allow users to own and monetise their gaming experience using the play-to-earn model. We briefly discussed about Axie lnfinity in our event, but do look forward to our upcoming report “Who is Axie Infinity”, which is a deep dive.

Who will win?

Like the DotCom bubble we’ve experienced in the past, the question then would be “Who will come out winning at the end of this cycle?”

The answer is – who knows? There are so many factors which remain uncertain – and if we could predict precisely who would win, we might as well bet, all in, on these companies. But we can predict a rough direction, and keep learning, so we do not completely miss out on any macro opportunity. 

If you are just starting out and want to learn about Web3, you are not too late. Do download a free copy of our Web3 report here. 

You can watch a replay of the event here.