One of the things I have been looking for regarding the re-emergence of crypto markets is a healthy pile of ashes. What I mean by this is that, in my mind, before a new bull market can take off, crypto markets have to experience a purge of failed projects, bad exchanges, and unprofitable ideas.
Crypto markets built up a lot of chaff during 2020 and 2021 – to the point that it is often hard to remember them all. The Uniswap forks, the loot NFT bubble, the P2E rush, low-effort NFT money grabs, re-hypothecation coins, and tons of DAO tooling projects for the ten real DAOs that actually existed – all of these trends added chaff to the market that pulled liquidity away from solid projects with a reasonable chance of success. As uncomfortable as it is, these projects must burn before a new bull market can take off.
The good news is that we are knee-deep in ashes. When looking at it from a distance, crypto markets are undergoing a conflagration in the past few years. We have all seen the large projects like Voyager, Celsius, FTX, and Luna go under, erasing billions in value and rocking the crypto world. But many other projects are also quietly shutting down or becoming ‘community-run.’ Fuji Finance shut down this week – citing an inability to get new investors. Recur, an NFT startup, announced they are shutting down in August even though they raised $50M at a $333M valuation in 2021 – they were barely around for two years. Rally, an Ethereum social token sidechain shutdown in January. Solana’s ecosystem got hit hard; Friktion, Everlend, Cardinal, and Formfunction have all shut down development. Other smaller exchanges have also shut down – Bittrex, Bifront, JPEX, and 24 Exchange are all gone. And finally, even hedge funds involved in crypto are taking hits. Bloomberg reports that 13% of crypto hedge funds have shut down in 2023 alone.
One More Mass Extinction
This post isn’t just my doom posting, though. I want to be clear on that. This post is me slowly becoming more bullish toward the market. As things begin to look worse, I am becoming more hopeful. There was too much garbage in the market that had to go. The brush is getting burnt off, and a healthy market with solid projects is reemerging. Like my prior post on a declining economic outlook of the traditional markets, crypto markets look best when things start to look worse.
The market killing bad ideas is also being seen in larger markets. Zume has shut down – the autonomous pizza truck that was supposed to bring the world faster pizza. WeWork plummeted from $598 to $2.96 – the only thing I can imagine worse than working in an office is working in an office with a bunch of random people. Fuzzy, a subscription-based pet healthcare company for neurotic pet owners, went under. Buzzer – the ‘Gen Z sports app’ that streamed live sports and raised $32.5M in a world with YouTube and Social Media streaming, died in 2023. These are just a few of the bad ideas the market is killing off, and this is a sign of a healthy market, in my opinion.
This Is A Crime Against Pizza
A sign of the market correction is that SimpleClosure – a venture-backed startup focused on automating the shutdown process for startups has just raised $1.5M. The market killing so many projects that start-ups emerging to help them die is so meta and ironic I find it darkly hilarious. Their funding round is even more hilarious given that venture funding is down from an all-time high in Q1-Q2 2021 of $228B to $29.4B in Q2 of 2023.
SimpleClosure Founders In 2024
The broad point here is that thanks to the exuberance of low interest rates and easy money, the market needed to kill off its bad ideas before a new bull market could take off. And for the first time in a few years, it seems like the market is finally burning off the brush, and we are knee-deep in ashes.