“The market can stay irrational longer than you can stay solvent” – John Maynard Keynes With every passing week, 2018 is surely cementing its reputation as annus horribilis for crypto investors. In what looks now to be a protracted crypto bear market, most altcoins, sans a few like Binance Coin, have lost a significant portion of their market from their ATHs in January. The only players in the ecosystem who have managed to weather the downturn so far have been the infrastructure companies, exchanges such as Coinbase, Binance and the mining giant Bitmain. Binance’s quarterly profits now surpass Deutsche Bank’s and are on track to hit $1 Billion for 2018. Coinbase saw its valuation rise from $1.6 Billion to $8 Billion in less than a year while Bitmain is gearing up for one of the biggest IPOs this year. Smart VC money is seemingly shrugging off price declines across the board and remains bullish on the long-term prospects of picks-and-shovels businesses in crypto. Another perspective from certain market observers is that the market is discounting good news and perhaps overreacting to the procedural delays in ETF approvals. However, we argue that most of the positive developments in 2018 were mostly on the supply-side of things such as ICE Bakkt, the a16z crypto fund, or the Goldman Circle/Poloniex acquisition) and when the Winklevoss’ ETF approval, which was expected to drive mainstream demand for crypto, got rejected, the market reacted negatively. With not much in the demand-related news in the pipeline for Bitcoin as well as the broader cryptocurrency markets, we expect the bear market to persist for the remainder of the year. Among the other factors that contributed to the selloff was the market’s unreasonable and excessive fixation since the beginning of this year over the foray of smart ‘institutional’ money into crypto. This part of the puzzle is taking longer to solve particularly given that custodial solutions is still under development, and managers at the traditional institutions will likely want to see a J.P. Morgan or a Goldman or a BNY Mellon offering crypto custody solutions before they will make the pitch internally to their investment committees. We expect an acquisition by one of the Wall Street majors in this space in the next few quarters, much like Goldman’s acquisition of Poloniex earlier this year. On the positive side, this prolonged bear market should provide both retail and institutional investors ample time to accumulate good cryptocurrencies at arguably attractive prices. Ultimately, there seems to be a secular uptick in demand, as evinced by the volumes and the profit margins on these ‘generation-1’ crypto exchanges On the other hand, maximalists are happy to see Bitcoin reclaim its lost turf (>50% dominance) and are confident that Bitcoin will survive this drawdown just as it did in 2014 after the famous Mt. Gox hack. Readers of a certain vintage will definitely remember the first flush of browsers that hit the market, or the sturm und drang of the search engine wars. None of Altavista, or Lycos or Gopher ever really became relevant in the way Google became relevant, and very few even remember Netscape among the mostly Gen-Y/Gen-Z current crypto-faithful. Even network externalities could not save Orkut or Myspace retains their thrones against later entrants such as Facebook and Instagram. It will be interesting to see how BTC and especially ETH, hold on to their pre-eminent positions as faster, nimbler, fresher protocols try to approach the same problem space that these protocols have been addressing. In addition to Installed user base and network virality that played marginal roles in the browser and the social network wars, accrued financial value, in the form of heavily-funded, entrenched, holders and adopters of BTC and ETH will determine the outcome of the upcoming protocol wars. We will do a deep dive into this rabbit hole another time.