Vitalik Buterin, co-founder of the Ethereum blockchain, says the digital-asset universe may actually benefit from the current retreat in coin prices that’s cast a chill on investors and is being referred to as another crypto winter.
“The people who are deep into crypto, and especially building things, a lot of them welcome a bear market,” Buterin said during an interview with Bloomberg. “They welcome the bear market because when there are these long periods of prices moving up by huge amounts as it does — it does obviously make a lot of people happy — but it does also tend to invite a lot of very short-term speculative attention.”
Cryptocurrency prices have tumbled since reaching record highs in early November as investors and speculators anticipate a reduction of the massive amounts of stimulus added to economies and global markets in the wake of the Covid pandemic. The Bloomberg Galaxy Crypto Index is down about 45% from its all-time high. Ether, the native currency of the world’s most widely used blockchain, has slumped around 40% during the same period.
“The winters are the time when a lot of those applications fall away and you can see which projects are actually long-term sustainable, like both in their models and in their teams and their people,” the 28-year-old crypto billionaire said.
Yet Buterin, who said he’s “surprised” by how the market has moved since last year, isn’t sure whether crypto has entered another winter or the sector is just mirroring the volatility in broader markets.
He added that a crypto winter can also help those who are building projects in crypto focus on improving the technology.
Buterin’s comments came not long after the popular crypto protocol Wormhole, a cross-blockchain bridge, was hacked for over $300 million. Buterin back in January warned about the risks of using cross-blockchain bridges. So-called cross-blockchain bridges often work by taking a cryptocurrency on one blockchain and locking it in a software program known as a smart contract to issue a parallel cryptocurrency on another blockchain.
Buterin has shifted his focus to scaling Ethereum in recent years. The popular blockchain has long suffered criticism because transactions on Ethereum can be slow and expensive. Buterin’s Ethereum Foundation is leading the latest efforts dedicated to improving the blockchain’s scalability.
“When everyone is again trying to use blockchains,” Buterin said. “We don’t want them to discover yet again that no, actually, there isn’t enough space on the chain for everyone.”