Progress & Clarity: Here’s ALL the Recent Crypto FUD and Why It Could Actually Be Good for Crypto…
Bear markets can be messy. Really messy. Blockchain is a brand-new technology, so the speculative nature of investing in tokens has a cascading effect in both directions. This is market psychology 101:
The price goes up, and everybody says, “We’re going to the moon, buy more!” so the price goes up again, and everybody says, “We’re still going to the moon, buy more again!”, and so the cycle continues.
The price goes down, and everybody says, “What if it never goes up again? Maybe I’ll sell now and buy back in later.” so the price goes down again, and everybody says, “IT’S GOING TO ZERO SELL IT ALL!”, and so on…
But 2022 is also the first crypto winter to coincide with a global economic downturn. The S&P 500 (the collective stock price for 500 of the biggest US companies) has plunged 25% since November. We are also seeing levels of inflation in the US Dollar (the world’s reserve currency) that hasn’t been seen for decades.
Now, don’t be alarmed. I’m not trying to scare you. Instead, I will show you exactly why this messy environment could be good for blockchain in the long-term.
On all the recent FUD…
It’s thought that Michael Saylor (CEO of Microstrategy) is in danger of being liquidated on his Bitcoin long position, and the news spread like wildfire without any confirmation of whether it’s actually true. This kind of story is the kind of FUD (Fear, Uncertainty, Doubt) that typically characterises bear markets.
Another typical characteristic of a bear market is that projects and protocols with flawed fundamentals can get found out quite quickly. Anchor protocol crashed as LUNA capitulated, and there have been other incidences of DeFi protocols struggling in recent weeks such as Celsius Network blocking all withdrawals and Inverse Finance being hacked.
Most recently Solana-based DeFi platform, Solend, appealed to its community for permission to gain access a whale’s wallet without the whale’s permission. The whale had staked a whopping 25% of the TVL (Total Value Locked) on the platform, and borrowed over $100m worth of stablecoins against the position. As the price of Solana dipped closer to the whale’s liquidation price, the entire stability of the ecosystem was threatened. Meanwhile, the whale was nowhere to be found.
Of course, the Solend whale has no real obligation to return the $100m he borrowed, as he will lose the $200m that was staked by default. Problem is, the market can only absorb so much liquidity before problems start to arise.
All these stories look messy, for sure. So how could any of this possibly be good for the crypto space?
Bear market capitulations highlight the weaknesses inherent to certain protocols. While it’s nothing but negative for those directly involved, it also means that future projects are unlikely to make the same mistakes.
It means that, over time, we’re left only with the strongest protocols and the crypto space will be even more resilient than it already is.
The vast majority of projects and protocols work extremely well. Users can send any amount of money all over the world in an instant at any given moment on any given day, as well as take advantage of some of the amazing applications being built on-chain. Crypto’s utility hasn’t changed a single bit, even with the current price dip.
In time, we’ll be left with the strongest of protocols and all the best applications of the technology. That’s a positive long-term result from an admittedly negative moment.
Something else that can be turned into a long-term positive is the amount of legal action occurring in the space. From the UST/LUNA capitulation to Elon Musk supporting Dogecoin, there are some angry investors looking to take action for recent dips.
To add to that, the SEC is now investigating whether BNB is a security in a similar case to the ongoing XRP saga. So what’s the significance of all this legal action?
Well, blockchain technology might finally gain some clarity. The thousands of projects being built on-chain aren’t going anywhere, so regulatory clarity will most likely attract more mainstream users in the long-term, and may even result in global adoption.
A Dark Hour Before Dawn?
While still speculative by nature, crypto has almost become a household phenomenon due to its recent surge in total users. Now, institutions, governments, and corporations have a level of interest in blockchain technology that we’ve never seen before.
Bitcoin is legal tender in El Salvador, and Russia just announced that they recognise Bitcoin as a valid form of payment for overseas transactions. In the US, there is a brand-new proposal at the Federal Reserve for a CBDC (Central Bank Digital Currency) to “help maintain the dollar’s international standing”.
In essence, what we’re starting to see is a real desire to utilise blockchain technology.
Crypto may be in a tough spot right now, but we at Sheesha Finance are always bullish for the future. That’s why our mission is to help projects achieve their goals and expose our community to some of the best new innovations around.
We know for certain that all 150 Sheesha partners are still building amazing products for the world to enjoy for years to come.
Why Stake with Sheesha?
Sheesha Finance is a leading DeFi Staking Platform. We provide benefits from a premium, diversified cryptocurrency portfolio, with a staking platform that rewards investors of any size, from small to large ticket holders.
We have built an Investment and Incubation platform, Sheesha Foundry, with an extensive network of partners who are thought leaders in the crypto space. This allows us to consistently discover promising projects in their early stages.
Our easily convertible assets can be used to maximise rewards and gain exposure to existing and upcoming DeFi projects. With plans to become a member-managed Decentralised Autonomous Organisation (DAO), Sheesha Finance is dedicated to upholding full transparency and integrity within the DeFi space.