Cryptocurrency Firms Hope Bear Market Weeds Out Bad Players

Blockchain and cryptocurrency industry executives told CNBC that the recent downturn in the digital currency market should help weed out “bad actors” in the space.

Billions of dollars of value have been wiped from the cryptocurrency market in recent weeks due to a sell-off in shares and the collapse of algorithmic stablecoin terraUSD and its related luna token.

“We’re in a bear market. And I think that’s a good thing. It’s a good thing, because it will take out the people who were there for the wrong reasons,” Bertrand Perez, executive director of the Web3 Foundation, told CNBC at the World Economic Forum. in Davos, Switzerland.

“It’s also good, because all those projects are gone. So the legit ones will be able to focus just on developing on the build and forget about the token valuation because they’re all down.”

“During… bull markets when everything is green, nobody thinks about building, everybody thinks about making a fortune, which is… the wrong mindset,” he added.

Mihailo Bjelic, co-founder of blockchain company Polygon, echoed the sentiment, calling the crypto liquidation “necessary.”

“[The] The market, in my personal opinion, got maybe a little bit irrational, or maybe a little bit reckless to some extent. And when times like this come, [a] correction is usually needed, and at the end of the day [is] healthy,” Bjelic said.

The sell-off in major digital currencies like bitcoin and ether was triggered by a broader decline in stock markets, particularly in the tech sector. The drop was compounded by the loss of the terraUSD stablecoin from its peg of $1.

Large institutional investors have been getting involved in the cryptocurrency market and were also a key driver of the latest sell-off, according to Brett Harrison, president of cryptocurrency exchange FTX US.

He said there has been a broader decline in risk assets such as stocks, but that it is affecting digital currencies more than in the past because there is more institutional money in the space.

“If people are looking for assets to sell, cryptocurrencies will be on the list,” Harrison told CNBC.

Brad Garlinghouse, CEO of Ripple, urged investors to take a longer-term view.

“Bitcoin about two years ago right now, Bitcoin was around $8,000. Now it’s at 30,000. So yeah, there’s been a dip and a trillion dollars came out. But when you zoom out a little bit further and look at the long-term trends term, I think you see that cryptocurrencies are here to stay,” Garlinghouse told CNBC.

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