Original author: @Louround_
Original translation: Peisen, BlockBeats
According to incomplete calculations by BlockBeats, 9 projects, exchanges, and communities in the cryptocurrency industry stopped operating in 2021, 17 in 2022, and 27 in 2023. At the same time, in 2023, the number of suspended projects increased faster and faster, from an average of 1 per month to a maximum of 5 per month.
Related reading: "Multiple projects have announced their closures one after another. Is the crypto industry facing a "shutdown wave"? "
"LPs continue to support early-stage VCs that are growing in the industry, VCs continue to support founding teams in emerging sectors, and the teams continue to expand and grow in size. It seems that everything is moving in a better direction. But in fact, this is not the case. For many teams, 2049 is basically their last hope for financing. If the bear market does not end, this may be their team's last brand exposure, because most early-stage teams have basically reached the bottom of their runway after expanding in the past two years. The burn rate of some teams is very high, and they only have 5 to 10 months left in such a market. They even buy the sky-high tickets/sponsored booths of 2049 to pitch more potential investors."
Perhaps the reason behind the recent suspension of operations of multiple projects is that the funds raised at the beginning have now been burned out. And judging from the financing history of several recent projects, this may be the case. Behind these events, from community operations to project financing, every participant in the crypto industry has felt the chill of the bear market. However, former hedge fund analyst and crypto KOL @Louround_ expressed optimism on the social media platform, pointing out that there are certain positive factors behind this. BlockBeats translated the original text as follows:
One key indicator that we are in a bear market is that projects and investors are running out of cash and the ability to continue operations. More and more projects are cutting staff or shutting down, and investors are starting to sell off their holdings.
While this sounds pessimistic, it actually has some positives. In the past bull market, many teams raised funds and planned to use them to maintain operations for 2 years, which is a long time in the industry. Now they need to launch a token or conduct a public sale.
However, the current market slump has forced them to demonstrate a real value proposition to attract new investors, which is likely much higher than what they initially presented in a bull market environment. This has made raising funds more difficult than during the bull market.
Therefore, they face two options, either reduce their valuation and raise the next round of financing, which becomes quite complicated if they are VC-backed, or wait for market sentiment to improve and liquidity or funds to flow in, provided that their ability to continue operations allows it.
Unfortunately, the market is still in PvP mode and we see almost no new stablecoin inflows or user activity. In addition, the fragmentation of liquidity due to new chains and rollups has a great impact on the overall capital flow, which also increases the unfavorable factors in the market.
Image from @alpha_pls
So, as always, if the number of projects seeking financing continues to increase, but global liquidity remains constant, it will become increasingly challenging to attract capital, stand out and successfully raise funds.
what does that mean?
Projects that successfully raised funds in the last bull market or in the past year must demonstrate real competitive advantages in order to successfully conduct the next round of financing without generating revenue.
Clearly, many projects will be unable to raise additional capital or sell, which will reduce the funds needed to operate and extend their lifespan, increasing development pressure and potentially leading to project closures. We are likely to see projects develop entirely new features or services in an attempt to gain traction in the market.
Some recent examples
Fuji Finance closed due to financial and fundraising issues;
Yuga Labs laid off 120 employees;
Ledger cuts 12% of its staff;
Polkadot laid off 300 employees, or "made room for a new ecosystem leader, surpassing Parity";
Utopia shuts down current products and moves on to new projects;
Yield Protocol cuts operations due to market failure.
Therefore, the market is rectifying itself, eliminating projects that are not profitable or innovative enough and not adapted to market needs, allowing only truly innovative and high-quality projects to stand out and pave the way for the next bull market. Although this is not good for investors, cleaning up the market is a necessary thing. This will help eliminate projects that provide little value to the market.
Do we really need 5-10 decentralized exchanges (DEXs), lending or perpetual contract DEXs on every chain?
I don't think it's needed, and the market doesn't need it in the long run. Innovation, marketing, and hype will always be the main factors for success in this industry, and if a project is not attractive in these aspects, it is likely to fail. As market opportunities decrease and narratives become shorter, the slow time-based collapse is also affecting investor confidence in the market.
This makes it more difficult to make money in the market, thus sustaining the market.
In fact, we are seeing fundraising valuations and market caps that are typically in the six figures at launch drop significantly as projects need to present attractive opportunities to remaining investors. We only see this when the bear market has a severe impact on investors and builders.
In my opinion, once the ETFs, halvings, or money printing presses start to roll, money will flow, and in the meantime, the market crash will continue and reach its maximum pain point. These times are filled with opportunities for those who buck the trend and build long-term positions, while continuing to grow their network and improve their skills/knowledge.
Congratulations to those who are still active in this market, don't forget that in such market conditions, it is crucial to maintain capital. Stay vigilant and look forward to being called the lucky ones in the next bull market.
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