Crypto bear markets are a ‘great time’ to launch startups, industry execs say

There are other things to look at beyond crypto prices, the COO of Uniswap, Mary-Catherine Lader, said at TechCrunch Disrupt last week.

“Right?” She asked rhetorically. “Especially if you’re building something and you’re excited about the technology and its potential and not [viewing] crypto necessarily as an asset class.”

Even though the crypto market cap is below $1 trillion, down about 55% from $2.2 trillion at the beginning of the year, ideas, startups and big players are still entering the space.

“I think many of the products in the next phase could get to a point where consumers are using a product without knowing that there’s crypto behind the scenes.” Cuy Sheffield, head of crypto, Visa

“If you look at crypto market prices and pull out all of the general market decline [ … ] what are you left with?” Brett Harrison, former president of FTX, asked during the panel. “I think you’re left with how much institutions are trading crypto and actual applications that are being built on crypto.”

Compared to the 2018 crypto bear market, things have changed, Cuy Sheffield, head of crypto at Visa, said during the panel. “At the time there were questions of would anything exist outside of Bitcoin?”

Today, there’s so much more for people to look at and build upon, including stablecoins, crypto infrastructure or building a bridge between traditional finance and decentralized finance, Sheffield said.

“I think it’s a great time to be a startup crypto company for a lot of different reasons,” Lader said, including getting “more signal” as to whether what’s being built is useful and whether people actually want to use it.

“The lines between fintech and crypto are really starting to blur,” Sheffield said. Now founders and entrepreneurs are trying to solve fintech problems with blockchain technologies, he added. “There’s a lot more utility unlocked when you can actually use fiat currencies on blockchain networks.”

Beyond fintech, there’s been a lot of talk — and action — from institutional investors looking to get into crypto, too.

“Every sort of institutional source of potential trading activity, whether that’s a hedge fund or trading firm or asset manager or a liquid token fund at a VC, they’re all doing stuff in crypto; you don’t find anyone who says, ‘You know, we’re not going to touch crypto,’” Harrison said. “Everyone wants to get involved. The question is how fast can they get involved?”

Earlier this week, asset management firm Stone Ridge launched a Bitcoin-centric accelerator program with the goal of building out applications focused on the blockchain. In general, institutional engagement is the same as last year — if not better  as more and more big players like JP Morgan and Fidelity dive into the space to offer more options for clients.

“Another thing we’re seeing is lots of people taking advantage of the integrations, composability and ways to extend beyond the initial kernel of whatever they’ve built and try and connect to different parts of the crypto ecosystem,” Lader said. “There’s tons and tons of building still going on.”

The panelists agreed that some crypto startups primed for long-term growth and success will be focused on infrastructure or improving user experiences while making crypto products less daunting for the average person.

“I think many of the products in the next phase could get to a point where consumers are using a product without knowing that there’s crypto behind the scenes,” Sheffield said. “We haven’t really seen that to date. Like over the past few years, everyone who’s using crypto knows that they’re using crypto. But as the infrastructure matures, there’s many companies trying to abstract away the complexity.”

Also, there’s still a lot of investor support in the space, Lader added.

Sure, not all crypto venture capitalists are diving into deals; some are being more selective and writing fewer checks with bigger price tags, while others are waiting for valuations to drop even further.

Harrison agreed: “There’s definitely tons of capital being deployed and tons of undeployed capital is waiting on the sidelines ready to get in.”

“Over the short, medium and long run, you’re going to see this kind of immediate bounce back once markets in general recover,” Harrison added.