How Long Will The Crypto Winter Last? We Asked Three Experts
By Julia Herbst - 2/5/2019
It’s official: We’re currently experiencing the longest bear market in bitcoin’s history. The consecutive months of loss have now dragged on longer than the first bear market of 2011 and the notorious price slump of 2013-2015. The effects haven’t been hard to spot; we’ve seen layoffs, strategy shifts, and plenty of soul-searching from industry leaders.
To mark this milestone, we asked Jimmy Song, bitcoin developer and educator; Jake Yocom-Piatt, organizer of Decred and CEO of Company Zero; Travis Kling, founder and CIO of Ikigai Asset Management, what it all means. Their responses have been lightly edited.
How long will the bear market last?
Jimmy Song: No idea, but it’s going to last until a lot of the malinvestments are cleared out (read: bankrupted).
Jake Yocom-Piatt: The cryptocurrency space has experienced several bull runs in its history, with a spacing of one to three years between each bull run. I suspect that there will be another bull run within two years, likely starting nine to 15 months from now. If the fiat financial system experiences its long-overdue contraction post-2008, this may negatively affect cryptocurrency markets.
Travis Kling: Crypto winter will last until demand sustainably exceeds supply. Not to be cheeky, but it’s clear in the current market environment that there is a sufficient or an oversupply of crypto relative to demand. New facts and circumstances change this equilibrium every day. A set of facts and circumstances, whether they be price-related or otherwise, will emerge which will cause demand to sustainably exceed supply. This may be Q2. This may be Q4. This may be 2020.
What are good strategies for surviving the bear market?
Song: Invest only in things you’re convinced will be around five years from now and have a source of income.
Yocom-Piatt: Do not purchase large amounts of cryptocurrency in a single buy. Spread out your purchases over time, so that you can dollar-cost average and avoid the psychological pressure associated with a large buy at a single price. If you’re running a cryptocurrency project, stay lean during the bear market versus hoping that the bear market will end very soon. This is how we have been operating with Decred.
Kling: As investors in the space, surviving this downturn is predicated on remaining patient, objective, vigilant, and flexible. We must understand the market cycle and make investment decisions according to what will generate attractive risk-adjusted returns.
How concerned are you?
Song: Not concerned at all. The value prop is still there and nothing fundamental has changed, at least with BTC. Everything else, on the other hand, looks really vulnerable.
Yocom-Piatt: The fundamentals of cryptocurrency have been nearly static since the launch of bitcoin in early 2009, so I am not concerned about the long-term prospects for the space. With Decred, we have intentionally engineered our chain to be self-funding and drive longevity, so that even longer-lived bear markets are unlikely to seriously disrupt our work.
Kling: We are broadly, directionally, highly convicted in our bullishness. Specifically and over shorter times, we are highly uncertain and in fact we believe the specific path is unknowable at the current time. To turn things around we need more pain. More exchanges gone. More projects shuttering. More SEC enforcements. More developer rage-quits. More ICO Treasury selling. More layoffs. More fund liquidations. More scammers exposed. More failed cap raises. More “crypto is dead.”
Will adoption drive the next bull market or is adoption not necessary?
Song: Demand always drives the bull market, but that’s not what people typically think of as “adoption.” BTC is a good store of value and I expect that to be the reason for the next wave, whenever it happens.
Yocom-Piatt: It is difficult to say what drives bull markets besides a collective psychological state of market participants. The development of Layer 2 micropayment channels, e.g. the Lightning Network, will make a variety of new applications of cryptocurrency technology possible, which will likely drive a surge in adoption.
Kling: Price will lead adoption. Markets are discounting mechanisms. We’re not going to wake up tomorrow and some dapp will have stumbled upon 20 million users without the market seeing it happen in real time and adjusting prices accordingly.