Note: What are the differences between the current declining digital currency market and 2018?

The downturn in recent months has caused significant losses to a significant portion of investors, and many people are out of the digital currency space forever. However, some experts are looking to find similarities and differences between current trends and past downturns in order to predict the future of digital currencies.

To Report Kevin Desk, Lex Sokolin, co-author of the website and one of the directors of ConsentSys, a New York-based company based on China-based blockchain software, recently commented on the current downturn in the market. Has stated.

Sokolin said:

I have been to such a market before. You probably have experience with such a market. But if you have not experienced downtrends before, do not worry; Because you will see such situations later. Falling and rising is in the nature of the market.

The following note was written by Lex Sokolin and compared the current downturn market with 2018.

Yes, the digital currency market is full of meme designers, virtual trolls, scammers, monkey-themed NFT tokens, and a variety of online cultures. In this market, there have always been signs and stories, different narratives and societies with the same ideas that seem to wear uniforms. Our idea or uniform, which this time goes by the name “Web 3.0”, is also special and unique; Just like the coats and ties of the Wall Streeters in 1987 on Black Monday when stock markets collapsed. Or the T-shirts they wore in the early days of the Internet, when the United States went “online.”

Although the fall of creative ideas brings great tragedy into people’s lives, there is much to see and learn. Everyone, even myself, will make up stories and reasons for what happened and what it means.

Requests for legislation in the field of digital currencies by harming investors with stable coins, shadow banks and leverage hedge funds, [قطعاً] It will be more than ever. Requests for the restructuring of the digital currency industry are mainly made by people looking to use marginal capital. Others point to the Austrian school of economics and personal responsibility for investment, and will engage the debate in politics.

After these commotion, we calm down, get tired and forget about these issues, and then everything will happen again from the beginning. People are like cells, and society is like a giant creature. Each person has a specific limit to resist the collection we are part of. Besides, there is no good reason to want to resist. No anti-technology person has ever been right in the face of the constant technological changes that are reshaping the nature of human society. Of course, they may have been satisfied with this confrontation at the same time.

What is in a half full glass?

If you’re looking for a glimmer of hope, which I am, of course, this is the place to look. Will there be creativity and innovation in the midst of the chaos of capital destruction? Is all this a kind of recursive economic engineering or will there be an underlying operating economy and progress in world architecture?

This is where we can see the big difference between the present and the market collapse period in 2018, coinciding with the peak of the initial supply of digital currencies (ICOs); Because you also remember that time. At the time, large sums of money were being raised for start-up platforms and venture capital investments. Billions of dollars were raised for the promise of things that were only written on paper and never made or used by anyone. It was a collapse in the ideological space created by the pressure of regulators on the token-based method of raising capital.

Raising capital is not the main issue. The most important thing is your commitment to investors before starting the ecosystem building process. In addition, not much was said about the economics of Web 3.0 at the time. There were ideas about how to organize in decentralized organizations (DAOs) or the applications of NFTs, but at that time no one had managed to make as much money as today’s artists.

Instead, I remember my time at Lehman Brothers Investment Bank in 2008. At that time we saw the collapse of Bear Stearns Bank and its sale at an auction to JPMorgan Chase. At the time, we were constantly worried about who would be the next bankrupt bank, Lehman or Morgan Stanley? We are in the same situation now, except that the letters have changed. Celsius Company? Or Tri-Capital (3AC)? Or even go a little further back. Long Term Capital Management Investment Company? Lyman’s demise occurred when his partners refused to lend because they thought his balance sheet was too leverage and in difficult circumstances. Lyman fell victim to the “scam” and all investment banks at the time were at the same risk.

Innovations will be sustainable

The digital currency downturn of 2022 bears little resemblance to the failure to deliver on the promises of an innovative technology, and is more like the leveraging of traditional financial systems on a particular asset class. Words like “banking crisis” or “bankruptcy” that people use are exactly the words you can use for burning but efficient sectors of the economy.

In addition, digital currencies are much more intertwined and integrated with macroeconomics than previously thought. Thus, the effects of the Federal Reserve raising bank interest rates will create a risky environment in which technology companies deliberately file for bankruptcy, and the valuation of digital currencies will be done in a way that was not seen in 2018. This means that we have entered the world of large organizations very quickly.

I’m not saying that Web 3.0 is flawless or that it works perfectly. Instead, I refer to a vital systematic economy that has goals for the structure of the global economy. Yes, there are destructive actors in this field who are so-called “rag money” and fraud, and there will be hackers and thieves who attack digital banks. Falling prices reveal what they have done, and in the long run, their names will not be important except to give an example and show how the price chart works in such cases.

The machines and robots we build on Web 3.0 will continue to function even if the value of the total locked-in capital (TVL) of their platforms is lost. This was not the case with Lehmann, Enron, and other centralized companies whose bankruptcy and liquidation processes took many years.

Companies, individuals, and daoids that survive market changes will change their mindset. Assets should not be fully invested in a particular token. Risk management becomes more important when market happiness pervades. Multiplying a token is not fundamentally correct. Trading levers increase the speed of price fluctuations. These things are easy to say, but difficult to do. The good thing is that we have no choice but to deal with the situation; Because this situation is something we are suffering from right now.