Surviving the crypto price-plunge: the ICO projects weathering the storm

Media coverage of the crypto market over the last month has been dominated by headlines from the downright apocalyptic (“Crypto is dead”) to the self-congratulatory (“We told you so”). The bear market and investors’ resulting woes have even captured the attention of the major broadsheets. Unsurprisingly, reports that the likes of Steemit and Spankchain have been forced to cut their teams by more than 50% paint a worrying landscape of countless crypto projects who, after failing to hedge for a price-collapse, were now struggling to operate. 

But amid the disarray, there is a light at the end of the ongoing tunnel that is not centered on price recovery but instead on a community invested in the future of blockchain development. The Block interviewed eight Ethereum-based projects, who say that despite their diminished valuations, it’s business as usual… for now.

Here is how Gnosis, SALT, Zilliqa, Blockstack, Civic, Polkadot, Aragon, and Komodo describe their experience of the ‘crypto shake-up’ so far.

  • Survival of the fittest (and most prepared)

It is an obvious question to ask how projects survive when the cryptocurrencies they raised have had their values slashed? The answer lies partly in how companies handled their reserves prior to the bear market.

The most dramatic example of this approach is Civic, an identity-verification app. Its CEO, Vinny Lingham, told The Block how they quickly sold more than 90% of the crypto acquired in the ICO, building the company’s reserves almost exclusively in dollars.

“Those who didn’t,” he says, “are in a lot more trouble.”

Similarly, Muneeb Ali, the co-founder of the decentralized internet provider Blockstack, noted that their policy was to hold a minimum of 70% in fiat; a figure in line with that of crypto-lending platform SALT. Co-founder Blake Cohen said that despite philosophically being long on crypto, SALT had “implemented a conservative treasury strategy and manage[d] [their finances as a traditional business.”

The incentive to convert large amounts of crypto into fiat before the price-drop may be connected to the timing of the ICO. Most of the eight featured here (except Zilliqa) launched when the price of ETH was favorable in 2017, as seen in the graph below, allowing them to hedge and profit amid the bull market.

Data Source:

Meanwhile, Aragon’s Luis Cuende, the CEO of the decentralized governance platform, says rather than converting mass amounts of crypto after their ICO boom, they endorsed serious frugality from the onset.

“We acted like we had 6 months in runway,” he jokes, yielding a philosophy he’d learnt from a background in start-ups. Zilliqa – an Ethereum competitor, which is designing a smart-contract processing platform – took the same approach. While its CEO and Co-Founder, Xinshu Dong, did not clarify what percentage of ETH they had converted into fiat prior to the crash, he commented that they’d “applied prudent financial practices.”

  • An opportunity to drown out the noise

“The crap gets destroyed” when things get tough, says Civic’s Vinny. In other words, he believes the bear market has successfully cut those who were short-sighted or sheer opportunists in the crypto sphere. Blockstack CEO Muneeb agrees that the nuclear winter has put a spotlight on those who were misselling themselves.

“We’ll be seeing how several [projects] we believed were well capitalized, were not that well capitalized after all. And sooner than expected,” he says. 

The price-crash has also urged companies to concentrate (perhaps with greater urgency) on developing blockchain solutions rather than crypto. Peter Mauric, Head of Public Affairs at Parity, Polkadot’s developers, said: “The downturn over the last year has primarily been in the crypto markets and a subset of the industry. The fact that the hype level has come down means developers are able to focus on what’s important. I believe we’ll come out the other side with a whole load of great tech and infrastructure.”

“Polkadot is in this for the long-term and we’re just getting started.”

 Zilliqa CEO Xinshu agreed.

“We tend to mostly ignore the market, be it a crazy bull or crazy bear. Our work is based on the tech, not the day to day price on the market. of course, it is easier if each crypto coin buys more in the fiat world, but these cycles are normal in crypto. We planned for it…I believe it has provided a much-needed opportunity for organizations to focus on the infrastructure, the ecosystem, and the technical backbone of their project,” he said 

  • Uninterrupted growth spurts 

There’s no better way to demonstrate resilience than to grow. Polkadot’s treasury manager, Web3F, say they have continued building their teams amid the bear market.

“Over the past few months, the Web3 Foundation has doubled in size, bolstering our team with cryptographers and researchers focused on the fundamental building blocks of Web 3.0. We intend to continue growing…through expanded grant programs, supporting both development and ecosystem partners,” said its Director of Communications, Jack Platts.

Despite a large amount of their raised ETH being stuck after a hack, they also acquired $83m in Swiss Francs, explaining their liquidity.

Komodo’s anonymous founder shared their decision to lean into the storm and capture the talent being let go elsewhere, accelerating its goal to create private and secure digital assets. Zilliqa shared similar success, noting that they are still “actively hiring” following the opening of a London office in October.

Meanwhile, Stefan George – co-founder of events-prediction platform, Gnosis – says neither the company’s burn rate, strategy nor launch timescale has been affected by the market. SALT even suggested the bear market had been beneficial to their business model, “demonstrat[ing] the viability of lending against a volatile asset,” 

  • A future under pressure?

It’s worth remembering that despite their optimism, however, these projects will now face growing demands from investors and enter 2019 without the safety net they expected. Aragon’s CEO suggested their runway has gone from 100 years to 10 – “knocking off a whole zero.” SALT meanwhile denied to comment entirely on the question of runway after noting that the price-drop had “eroded the balance of our loan portfolio.” This means that a price-recovery is central to their long-term survival. Similarly, Komodo’s founder hinted that if the bear market lasts for more than another year, “real issues” might begin.

Blockstack’s Masood also drew on reports that investors are losing faith in the blockchain experiment. He acknowledged that capital raises might be negatively affected going forward and that the  “herd mentality” of some VC firms could create obstacles. Nonetheless, he concluded that the “top investors were very independent thinkers…[and] the good projects will still find capital.” 

So, what happens with the market awaits to be seen. But what’s clear, is that some ICO projects are best compared to snowdrops and irises – roots that grow in the winter.

The post Surviving the crypto price-plunge: the ICO projects weathering the storm appeared first on The Block.

Surviving the crypto price-plunge: the ICO projects weathering the storm written by Isabel Woodford @ December 11, 2018 Isabel Woodford

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