







There’s no way to sugarcoat it: this bear market is brutal. Over the past year, Bitcoin has plunged from over $20,000 to its current position of around $6,500, and many other cryptocurrencies have followed it on the way down. But in the long run, the bear market is likely to be good for crypto. Here’s why:





First, it weeds out the scammers. With the explosion of the crypto market came a corresponding explosion in scams, schemes, and frauds. Entire cottage industries like the fake ICO white paper writing market cropped up to help ICOs trick crypto investors, and high-profile schemes like BitConnect made big headlines when they blew up and left their investors holding the bag.





And while it’s difficult to track down exact numbers, one study suggests that as many as 80% of 2017’s ICO projects were scams, even though most of the year’s ICO funding went towards legitimate projects. It’s not hard to understand why -- at the height of the bull market, ICO money was flowing so freely that with just a white paper, a website, and a little marketing, almost any project could raise funds.





Sure, plenty of crypto investors weren’t burned by scams, but there’s no doubt that the prevalence of such scams negatively affected the perception of cryptocurrencies and blockchain among professionals in relevant industries. A 2018 survey of finance professionals by Foley & Lardner, for example, found that more than 60 percent of respondents felt fraudulent crypto offerings posed a “strong” or “very strong” risk to the future of crypto.





Scams and other crypto fraud are just less profitable in the context of a bear market. It’s no surprise that as Ether’s price declined, the number of ICOs likely declined along with it. Scammers are likely to head for greener pastures elsewhere, and that’s good for the long-term reputation and viability of crypto.





Second, it weeds out weak and poorly-run projects. A Boston College study found that more than half of ICO projects were dead within four months of raising funding. That suggests that an awful lot of incredibly weak projects were siphoning investor attention away from the rest of the industry. Other measures support the same conclusion. Dead Coins, a website that tracks inactive and otherwise dead crypto tokens, currently lists more than 900 failed projects. That’s up from just over 800 in early July, meaning that the continuing bear market seems to be killing off weak projects at a pretty fast clip.





As crypto investment firm BKCM founder and CEO Brian Kelly put it, “the days of a white paper and a dream and $30 million are probably over.” And that’s a good thing. Weak and poorly run projects will inevitably fail eventually, but the sooner they do, the less investment, attention, and talent they’re likely to siphon away from the rest of the industry. Every dollar invested into a soon-to-fail crypto coin is one that won’t go towards supporting tokens with a future, so reducing the number of weak projects on the market can ultimately only help those projects that do have a shot at success.





Third, the bear market puts the focus back on creating meaningful products. When the crypto market is booming, everybody’s trying to attract investors and get a slice of the pie. But that focus on investors can be a distraction from what should be the ultimate long-term pursuit of every crypto startup: building a great product and attracting users. In a bear market, funding from investors is comparably difficult to come by, and that puts the pressure back on crypto firms to build great products and monetize the traditional way: by attracting users and selling their services.



And indeed, we’re starting to see high-profile blockchain players take steps towards doing exactly that. Civic, for example, just announced plans to give away millions of dollars of its own tokens in a bid to attract users to its platform. In other industries, it wouldn’t be particularly surprising to see a tech startup invest money in attracting users. But in crypto, the focus on investors during the boom was so significant that a crypto firm aiming to attract users feels like a breath of fresh air. We’re likely to see more of that if the bear market persists., Blockchain startups that can build a great product and generate real revenue from users won’t need to fear the whims of crypto investors.





Let’s be honest: working in crypto during a bear market isn’t "sexy." Your portfolio looks like a Tarantino fight scene, investors aren’t throwing money at you, and when you tell members of the general public that you work in crypto, they look at you with a mix of skepticism and pity. None of that is fun, which means that the people working in crypto now are a lot more likely to genuinely believe in the potential and value of what they’re doing. There will be fewer quick-buck teams, and that’s going to result in fewer but better-quality crypto products.





Building great products and attracting real user bases is what’s best for crypto in the long term, in fact it's the only way the industry can succeed. So anything that pushes crypto firms in that direction is a step in the right direction.





Obviously, the bear market has been painful for investors, including many crypto enthusiasts. But if you believe in the future of this technology, then the downturn is probably the best thing that could have happened to a blockchain industry that was bloated, unfocused, scam-ridden and full of weak projects chasing easy cash.



