Crypto Investment Is Chess, Not Checkers. And Guess What? It's Your Move There is a silver lining to the current recessionary crypto markets.
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This past year of events and severe lack of financial rectitude would have any investor, retail or institutional, grappling with their internal monologues about long-term market confidence. 2022 has seen some of the crypto industry's most lucrative empires crumble, unicorns disappear and a resurgence of 2008's worst media discourse.
Bearing more monetary value than the GDP of Costa Rica, in the past eleven months alone, we've witnessed the collapse of the Terra stablecoin, the bankruptcy of crypto hedge fund Three Arrows Capital and crypto lender Celsius, as well as the most prolific year for network hacks, collectively amounting thus far to an estimated loss of almost $70 billion. All of this happened before the unprecedented collapse of Sam Bankman-Fried's crypto exchange FTX and its Alameda Research counterpart. The result of this series of blows to the industry is, of course, a myopic viewpoint on Web3's efficacy.
As the word recession begins to permeate conversation the world over, and we potentially move into the new year within a declining market, a long-term strategic viewpoint is crucial to keeping this whole Web3 thing afloat and far away from the phrase 'in vain.'
Bringing a thread of solace to the situation are our learnings from the dot-com bubble burst in the early 00s, the subsequent stabilization of the tech sector and the rise of the behemoths we know today — demonstrating that promising technology sustains itself in the long run. While the next chapter may be an impossible challenge for most, it is nonetheless worth pursuing. After all, bull markets breed rich people; bear markets breed the wealthy.
The gravity of the 2008 financial crisis knows little bounds. The event was arguably the most impactful one of our lifetime, ravaging the entire global economy. Nearly 9 million people lost their jobs, and almost 10 million people lost their homes due to foreclosure. After four years, more than 46.5 million Americans were living in poverty. Countless people defaulted on auto loans leaving them without a car and with incredibly low credit scores. These poor credit scores have led to the inability to access credit, which has led to financial, social and practical exclusion.
The aftermath of this recession has continued to proliferate many lives. We cannot and should not draw parallels between that event and what's happening with cryptocurrencies and technology. We are not seeing crypto's 'Lehman moment' — a narrative propelled by media. Recessionary markets do not denote a recessionary economy. What we are seeing is a more substantial, more volatile crypto winter than the last. We also see a decline in equity investments — something that can happen before and after an economic recession is declared — but most importantly, we are seeing an opportunity to understand the consequences of our current frameworks and the value proposition that still remains.
Crypto and financial parity
I'm not oblivious to the financial losses incurred over the past few months — losses of significant magnitude from which many will not recover. I have nothing but empathy for the investors who have been failed by a nascent system that lacks effective regulation. However, this declining market has a silver lining for the vast majority of the U.S. population who have not yet invested in digital assets.
For those not physically recoiling at the idea of funneling more money into crypto and Web3, the downward trajectory of market price allows many people to bulk buy the dip and accrue a portfolio of assets they previously may have been priced out of.
As the racial wealth gap continues to widen in the U.S. and minority communities look to bank on crypto for alternative income generation, declining markets, in some respects, present an opportunity. Warren Buffet's famous quote, "be fearful when others are greedy and greedy when others are fearful," springs to mind.
Successful startups, and even some unicorns, are born during bear markets by serving new demands created by economic circumstances. Out of the last crypto winter came crypto unicorns Uniswap and OpenSea. Based on previous economic cycles, we know that with robust use cases will once again come market confidence, institutional backing and finally mass adoption. Historically, bear markets are shorter than bull runs, and so, if you can stomach the volatility long enough to remain invested in the market, this can separate you from the rest.
Black Americans hold less than 3% of overall wealth in the U.S. despite making up 16% of the population. Instead of trying to fight the systemic barriers of the traditional financial system that has been in place for centuries, digital asset investment serves us with a chance to blaze our own trail, with access to the markets at our fingertips at a minimum investment threshold of $5 or $10. The biggest challenge we still face in this regard is education. The 2022 Black Investor Survey from Ariel-Schwab found that 29% of black Americans who invested in something they didn't fully understand did so because it seemed like a "sure deal." This is how you lose money, not gain it. While stocks and coins continue to plummet, take some time to read, watch and listen.
Now is the time to look beyond traditional systems of wealth generation so that we narrow wealth disparity and level the playing field in the U.S. and beyond. Likely, the next unicorn, unmatched digital asset, or exclusive NFT collection is being built for public trading during this bear market. Imagine missing the opportunity to invest in it ahead of the next, guaranteed bull run.
TLDR: Crypto investment is chess, not checkers. And guess what? It's your move.