Hello everyone, and welcome back to Chain Reaction
In our Chain Reaction podcast this week, Anita and I chatted with Kevin Rose of True Ventures and Proof Collective on the latest crypto crash and what the future of NFTs looks like in a bear market. More details below.
Last week, we talked about the efforts of regulators to chase crypto crime. This week, the markets have crashed, and a new generation of crypto startups are likely about to find out that you can’t pay for loyalty.
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This week was a doozy for crypto investors, there’s no other way to put it. But it was a different kind of doozy than the crashes before it.
For a brief summation, hundreds of billions in value were erased from the global crypto market cap this week as top coins like Ethereum and Bitcoin saw major declines while other blockchain networks essentially imploded. Hundreds of thousands of crypto investors were liquidated on trades as tokens indiscriminately crashed across the board, meanwhile Terra’s stablecoin fiasco — which my colleague Jacquie has plenty of details on here — seems to have evaporated tens of billions in crypto wealth in the course of a day or two.
For longtime crypto traders, the wild downward pressure on the markets may appear to be old hat, but the amount of money being lost and the amount of people losing money is an order of magnitude larger than ever before because crypto markets have expanded so dramatically during this bull run. If the crypto markets continue to go to hell in a hand basket, there’s going to be a lot of lasting damage when it comes to consumer onboarding as web3’s paid acquisition budget runs dry with decreased volumes.
After several years of Robinhood and r/wallstreetbets retail investor gambling on public stocks, consumers were ready for crypto and the industry welcomed them with open arms. For the past couple years, venture capitalists have been making bets on crypto verticals geared towards consumers, gamifying investing with actual games that boasted tokens and NFT integrations. All the while, web3 acolytes have highlighted “community” as one of the killer features of crypto-based platforms with the explanation that giving users a financial stake in the platform will lead them to act in the platform’s best interest and spread the gospel accordingly.
This has all played out well enough during the “up-only” era of this crypto bull run, but now comes the interesting part.
Giving users financial incentives to enjoy your product works well enough when those financial incentives exist, but things look a little different when the air is taken out of the space and users are left with the naked and unexciting platform. Play-to-earn gaming companies have raised billions for games that are only fun when you’re getting rich and otherwise awful. NFT projects have similarly coaxed users into trading card-like mechanics that are only fun when the money is flowing. Meanwhile, VCs have bankrolled web3 media companies, publications and social networking companies that are all overly reliant on crypto speculation while generally shipping bad products.
Some might read this as a general indictment of the ponzinomics of crypto, but the other way to read this is that in the gold rush of web3, blockchain founders forgot what it meant to love something because it was a great product and over-indexed on the sustainability of consumer greed or financial desperation. Now, the crypto market could bounce back tomorrow, but it won’t be any less true that you can only pay for loyalty for so long.
Hello, Anita here again. On the Chain Reaction podcast this week, Lucas and I talked about the crypto winter looming for investors. Public equities overall are taking a hit right now, with the S&P 500 falling for five days straight while crypto-linked companies such as Coinbase and Robinhood are bearing the brunt of market fears.
Cryptocurrency prices are plunging, too. Bitcoin, the world’s largest crypto by market cap, is down more than 50% from its November peak. It’s dipped below $30,000 a few times in the past couple of days, which analysts say marks a crucial threshold for the coin — if it keeps dropping, it’s likely the losses will continue to grow. The fiasco going on with Terra’s UST stablecoin, which is backed partially by Bitcoin, certainly isn’t helping the situation.

But crypto bulls like to speak in decades, not days, and tend to have a stomach for volatility that isn’t present in the broader market. This is far from the first time Bitcoin prices have crashed, so it’s worth taking a look back in time and seeing how Bitcoin fared throughout the last major crypto winter in 2017. Early that year, Bitcoin peaked at $20,000, but it came crashing down below $12,000 in late December as hacks, regulation and investor skittishness all came to a head. It didn’t start appreciating substantially in value again until late 2020/early 2021, when it finally passed the $30,000 mark, where it’s (mostly) stayed above ever since.
This time around, things could be different for the OG cryptocurrency. Far more retail investors hold Bitcoin now, and only time will tell if they have the wherewithal to weather the storm. What’s more, Ethereum and emerging blockchains like Solana have already been eating away at Bitcoin’s competitive edge. You can read more about the issues that have been plaguing Bitcoin and what its backers are doing to help boost it in my latest feature here.
Bitcoin’s bid to become the ‘one chain to rule them all’

Don’t forget to check out this week’s episode of Chain Reaction to hear Kevin Rose, co-founder of the viral Moonbirds NFT project, share some words of wisdom amid the downturn.
Subscribe to Chain Reaction on Apple, Spotify or your alternative podcast platform of choice to keep up with us every week.
Anita Ramaswamy
Where startup money is moving in the crypto world:
Terra’s UST crash will make life harder for crypto as regulation looms
This past week, stablecoins have taken the main stage across conversations in the crypto world as a number of factors shake the industry up. As the crypto market responds with bearish sentiments, a major question stands: What does this all mean for the future of stablecoins? A number of market players weighed in on what the road ahead may look like.
Shark Tank’s Kevin O’Leary talks crypto and why he’s pro stablecoins
Speaking of stablecoins, Shark Tank’s Kevin O’Leary sat down with TechCrunch to share his thoughts on a number of crypto-related topics like crypto regulation and why he’s pro-stablecoin. We also discussed institutional firms entering the space and the kind of crypto-focused company he would create if he decided to do so, among other things.
Coinbase’s NFT marketplace is off to a lackluster start
In other news, Coinbase NFT launched its beta mode three weeks ago from today but has still yet to pick up any adoption — even after opening its doors to the public last week. The anticipation of where it should be right now has not matched expectations, one source said, and it’s unclear if it ever will. Given the scale of Coinbase’s crypto exchange, one would think that its NFT marketplace would also succeed, but others are saying that’s unlikely and that its approach to entering the space.
Jacquelyn Melinek
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