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While facing the rapid decline in the price and market capitalization of all major cryptocurrencies, including Ethereum, its founder Vitalik Buterin expressed his perspective on the situation.
Buterin’s View on Bear Market
Vitalik Buterin claims that many developers approve of the bear market because it allows concentrating on developing the most technologically sophisticated products and services without being distracted by financial and speculative concerns.
While the bullish cycle is generally perceived enthusiastically by the Bitcoin community, it also attracts traditional speculators who are not interested in crypto technologies or infrastructure per se but rather try to maximize their short-term returns.
Moreover, the bullish market often leads to the rapid appreciation of the entire crypto market with the growing capitalization of almost all projects. The dynamics of their prices and capitalization can be very different from the underlying value they provide to consumers. The reason is that many assets may tend to appreciate on the basis of the general expectations shared by market participants who may lack deep technical or economic knowledge.
In contrast, the bearish cycle may be beneficial in the sense that all traditional speculators tend to leave the industry as they observe no additional opportunities for profit generation. As a result, the market stabilizes with the possibility of effectively differentiating between those crypto projects that generate the maximum value to consumers and others.
According to Buterin, the most sustainable and effective crypto projects can significantly benefit from the “crypto winter” by achieving proper recognition by the crypto community.
Buterin’s Forecast on the Crypto Market
Vitalik Buterin states that he cannot reliably predict the future dynamics of the crypto industry. He considers the following two major scenarios. The first one is the “crypto winter” with the prolonged recession that will affect the capitalization of all major cryptocurrencies, including Bitcoin, Ethereum, among others.
Under such conditions, it will be highly problematic for minor projects to demonstrate any sustainable growth. “Crypto winter” also presupposes the high likelihood of the crypto market collapse by 60%-80% with the changing priorities by investors.
The second potential scenario is just the correction within the prolonged market growth that will either constitute the continuation of sustainable market growth or the elimination of the traditional 4-year cycle completely. In this case, the current correction may end soon, leading to the further appreciation of the major crypto assets.
Buterin claims that he is not certain about what scenario will actually prevail but he suggests that the crypto market will be able to overcome such temporary problems and continue its strategic development in the long run. The current market capitalization of the crypto market equals $1.8 trillion, and it may continue to decline if the negative scenario is realized.
For comparison, the maximum market capitalization of the crypto market exceeded $3 trillion.
Potential Impact of Buterin’s Prediction on Market
Although Buterin has not specified his major expectations, it appears that the majority of investors may start considering the likelihood of the prolonged “crypto winter” to increase significantly. Therefore, the demand for crypto assets (with the exception of stablecoins) may decline.
Most speculators and short-term holders may prefer to close their positions as they expect higher losses in the near future. In addition, such market assessments can also affect the structure of the crypto industry, leading to the relative depreciation of minor crypto projects associated with the higher risks.
Most investors can still HODL the most established cryptocurrencies, such as BTC, ETH, BNB, or potentially profitable altcoins, such as SOL, ADA, DOT, and others. In contrast, those tokens that do not belong to the above categories face a high likelihood of rapid market depreciation.
Overall, the risks of the large-scale “crypto winter” with the significant decline in crypto assets’ value have reached the highest level in the past months. From the perspective of crypto developers, they should concentrate on the implementation of large-scale projects that may benefit consumers in the following several years.
The intensity of competition may also increase due to the higher financial pressure and the need to achieve the maximum cost-efficiency in terms of resource allocation. In any case, both Bitcoin and the major altcoins should be able to successfully overcome such challenges and maintain the sustainable pattern of their development.