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In the span of a few short months, the crypto space has witnessed the collapse of its most prized stablecoin protocol, the insolvency of multiple billion-dollar centralized finance (CeFi) platforms, the liquidation of its most revered private capital fund and following in suit, the departure of its dearest thought leaders.
Deep in the red and approaching max pain, many crypto investors are finally arriving at a critical juncture of self-inquiry What am I even investing in?’
Straightening such a question mark composes and defines the trying journey through a bear market, where depleted traders reevaluate their investment theses before determining whether to hang up their boots for good or gather capital to face the market anew.
For the traders that summon the strength to face the market once more, only genuine utility will be enough to weather their skepticism and restore enthusiasm let alone participation and capital.
As such, it is here in the suffocating bear market of 2022 where crypto’s leading privacy protocols are poised to make their mark. With surveillance technologies and authoritarian initiatives on the rise, privacy is the truest and most tried form of utility the market has on tap no speculation required.
The crypto bear market of 2022
As in past cycles, notorious critics have leveraged this year’s abrupt market downturn to throw fire at many of cryptocurrency’s suspect sectors most notably, CeFi. But for perhaps the first time, in 2022’s bear market no critic has yet been bold enough to dispel cryptocurrency as a whole. From influencers to institutions, to the traditional finance (TradFi) mainstream, a consensus has been established the asset class is here to stay.
Traversing volatile market cycles
Bullish and bearish periods play complementary roles in the development of nascent technology.
Bull markets provide a surge of capital and human resources that attract new talent and spur further innovation but in a haphazard and frenzied fashion. Amid the winners, many unprepared, unprofessional and unstable projects receive funding and launch aggressive marketing campaigns.
During the bear market, capital and resources are drained and bull market beneficiaries battle to remain afloat. The bear market is a time of refinery and clarity. With speculation waning to a standstill, all attention turns to what platforms and protocols actually provide for their users. Investors query, ‘Which platforms and technical solutions acquire and retain users when there is no promise of profit?’
Such is the bear market’s purest ultimatum. It is the foremost test of use case potential. To that end, the bear market cultivates a truly level playing field for projects new and old and replaces the noise and frenzy of the bull market with a true meritocracy for users and capital for adoption.
Beating the bear market inertia
In much the same way that profit margins serve businesses, tokenomic models act as the lifeline, keeping cryptocurrency protocols afloat during periods of macroeconomic distress.
With sentiment nearing historic lows, many tokenomic models have been exposed as speculative at best and dysfunctional at worst. As trust continues to decline across the crypto landscape, investors and users will withhold funds and demand a higher standard of professionalism from projects.
Whether ostensibly or in honesty, the champions of the 2020-21 bull market built ecosystems on the premise of profits DeFi and CeFi platforms offered staking yields, stablecoin protocols promised seigniorage and scalability solutions tantalized investors with good old-fashioned appreciation.
In 2022, retail has had enough. To pull cryptocurrency from the depths of bear market despair, projects must submit innovative value propositions absent from the usual profit ploys.
That is, they must demonstrate empirical utility and none answers the call like privacy.
Timely and imperative he undeniable utility of on-chain privacy
Kicking off with the Patriot Act, the twenty-first century has proven itself to be the era of mass surveillance. Now, its third decade is quickly becoming the era of draconian financial restrictions.
With many countries across the world nearing hyperinflation most recently Turkey banks and financial institutions are beginning to impose the usual measures restrictions on withdrawals and capital flight. And for the first time, they have the technologies and tools in place to enforce them.
As per the words of globally-renowned privacy advocate Edward Snowden in a recent interview,
“We are increasingly scrutinized, tracked, quantified and measured. We are nudged, we are manipulated… We have inverted the traditional model of how we protect society from power.”
Setting the stage for the next wave
In recent years, citizens seeking to protect their wealth have successfully flocked to decentralized systems most notably to Bitcoin and Ethereum. But with a slew of rising blockchain data analytics companies scoring massive valuations and high-profile clients, individuals are more exposed and more at risk than ever before.
On-chain surveillance is now a well-defined science and accessible service, and on-chain privacy is fast transitioning from preferred to imperative among investors.
As bearish sentiment weighs heavier and the crypto market begins to form a bottom, conditions will materialize for new catalysts to emerge and carry crypto to new heights. In this prerogative, a pair of privacy protocols are best positioned to take the reins.
- Privacy coins that enable users to store and transfer wealth on standalone blockchains dedicated to privacy-centric exchange.
- PriFi (private DeFi) platforms enable users to leverage their savings in Ethereum’s industry-leading DeFi landscape to provide liquidity, earn yields and access debt financing without exposing themselves to public profiling.
As in any free market, users will ultimately pick privacy’s finest to lead the next crypto market charge.
Alex Shipp, chief strategy officer at Offshift, is a strategist, writer and thought leader in the digital asset space with a background in traditional finance, economics and the emerging fields of decentralized finance, tokenomics, blockchain and digital assets. At Offshift, Alex contributes to platform tokenomics, produces content and conducts business development on behalf of the project.
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