When looking at cryptocurrencies from a macro perspective, then even an individual crypto-holder is still part of the early adopter's group.
The recent boom-and-bust cycle has been primarily caused by hype, but analyzing the data from a survey, just 8% of adults owned cryptocurrencies in March 2018, shows how rare cryptocurrencies holders are. And comparing this number with the innovators-curve, then we can clearly see that cryptocurrencies are not at all widely distributed.
Now with this in mind, I want to focus on another group, which has been seeing tremendous growth over the last 1-2 years: Crypto Businesses
Especially on Steem, a lot of crypto-businesses are being developed. For example: Steemit, Steem Monsters, Partiko and others.
While I don't have a source of the numbers regarding crypto-businesses in existence, I'm very confident it's far below the 2.5% innovators threshold. Which means, they are very, very rare and there isn't any real literature about them, yet.
And while one might think that crypto-businesses can be run very similar to FIAT-businesses, based on my own experiences as crypto-entrepreneur and by looking at the recent events, that's not the case.
In fact, businesses that are earning primarily cryptocurrencies, have to take a completely different approach regarding their income, as FIAT businesses.
The reason for this is simple: crypto-focused businesses have the risk of their underlying asset losing 80-90%+ of its value, which means companies have to develop their strategy with this in mind. FIAT businesses never had these kinds of problems, so when experts from that industry are joining the crypto industry, it's almost predictable that mistakes are going to be made.
The cryptocurrency market on the meta level is very similar to other markets; it's just that the crypto-market is on steroids.
While usually, a double-digit year (10%+ in both directions) is being considered huge, in the crypto-world, those are daily swings which are completely normal. Instead, it's fairly common for currencies to increase/decrease by 100%-1000%+.
Which means, if a company previously had 500k USD-crypto available per year and then suddenly this number rises to 5M, then that's obviously huge and could bring tremendous growth.
However, the same thing could happen in the other direction - instead of 500k, only 50k were available per year. And imagine these 50k would be reduced to 10k. If there isn't enough liquidity in FIAT, I guess the only thing to save the company then is to fire 50%+ of the staff.
Just by looking at the recent 70% staff lay off from Steemit Inc. it's pretty clear how dramatically the market can influence and shape a companies strategy.
Since Steemit Inc. is primarily generating profit by selling their initial stake of STEEM (a cryptocurrency); programmatically each month - they are very dependent and vulnerable to the assets market-trend and the price of cryptocurrencies in general.
While they are looking at other revenue models (for example Advertisement which would result in FIAT revenue) their main income is still being created through cryptocurrency-selling, which means their risk of going bankrupt due to the cryptocurrency market is real.
However, I believe the amount of risk can be reduced as much as possible, but this requires a specific strategy, customized for the cryptocurrency market.
Before I continue I want to mention that this is not financial advice. Instead, they are just thoughts of someone who has spent the last year in the crypto world, developing businesses & watching the market.
Now, I believe the way to create a stable crypto-business is anchored in two directions:
1.) Diversity in revenue assets (incl. FIAT)
2.) Utilizing the market trends optimally (bull & bear)
If the revenue is dependant on the underlying asset, it doesn't matter which cryptocurrency it is (unless it's a stable coin), they are all at risk of the underlying market.
Instead, I believe a good way to create a stable crypto-business is to offer services also towards FIAT options. For example, Steem Monsters is not only selling Steem Monsters Packs for cryptocurrencies, but also for FIAT. (2$)
And especially right now as the market is down, a lot of people are taking advantage of this offer - paying via PayPal & CC.
However, even this isn't enough if the strategy hasn't been optimized for a dark & long winter (such as the one we have right now).
For those who are not aware of what these terms mean:
A bull market is a time period where the prices are rising and a bear market is a time period where the prices are falling/stagnating.
The last bull market was roughly from May 2017 to Jan 2018 and the last bear market started in Jan 2018 and is still holding on. However, that's just for Bitcoin. Altcoins and other cryptocurrencies had some differences. (e.g. STEEM)
I would explain these time periods as follows:
I especially want to highlight the liquidity and safety net. I think it's very important for crypto-businesses to have enough liquidity to last through a 2-3 year bear market without compromising the companies structure, by relying on high prices.
Imagine, one month you'd be paying your employees 1 BTC and the next 5 BTC. Nobody can really plan with that kind of fluctuations.
Additionally, I also believe the way to bring crypto products to higher standards is to not only be reliant on people inside the ecosystem but also having enough FIAT to higher really great people, not yet part of the 8% owning crypto.
I've had the idea for this post in my head for a few days and I just wanted to share my thoughts about the current phase of crypto businesses with you.
Because I believe that we're super early in this economy and I would really want to read more literature about it, which isn't just focused on the investors or holder perspective, but on those wanting to build real businesses & products on top of it.
So with that said:
Keep on building, the bull market will come!
All the best,
Wolf
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