The recovery seen in cryptocurrencies since early February is proving to be short-lived. Most cryptocurrencies, led by Bitcoin BTC/USD, are tumbling on Sunday. Against this backdrop, a well-known name in the crypto industry and Ethereum ETH/USD blockchain co-founder Vitalik Buterin has a reassuring viewpoint for crypto enthusiast.
What Happened: Buterin said the crypto market downturn, which is referred to as a "crypto winter," is good for the crypto universe, Bloomberg reported, citing the crypto billionaire.
Crypto winter is a term coined to refer to a steep sell-off in digital assets that is sending a chill down the spin of those invested in these assets.
"The people who are deep into crypto, and especially building things, a lot of them welcome a bear market," Buterin said in an interview with Bloomberg.
He noted that an extended rally, may be welcome from the perspective of investors, but it also attracts "very short-term speculative attention."
Since the previous crypto winter in 2018, cryptocurrencies have rebounded and boomed, creating many millionaires and billionaires, the report said. This also led to the mushrooming of several "market manipulation schemes" such as "pumps and dumps" by people who were in the crypto market running applications, mainly for short-term profits, the publication added.
During downturns, a lot of projects run by fly-by-night operators may be forced to shut down, leaving only projects that are sustainable in the long-term, Buterin reportedly said.
Crypto winters also help crypto projects being run with the objective of improving technology, he added.
He noted that a crypto winter can also help those who are building crypto projects focusing on improving the technology.
Why It's Important: Buterin's Ethereum is a decentralized, open-source blockchain with smart contract functionality, and Ether is the native cryptocurrency of the platform.
Ether is the second most valued crypto in terms of market capitalization. It hit an all-time high of $4,859.50 on Nov. 10, 2021 and has lost about 46% of its value since then.
The crypto faces more "competitive threat, scalability issues and complexity challenges" than Bitcoin, Cointelegraph reported, citing Morgan Stanley analysts. It stands to lose smart contract superiority to cheaper and faster blockchains such as Cardano ADA/USD, Solana SOL/USD and Polkadot DOT/USD, the analysts said.
Buterin said in late December that he has set a roadmap for ETH 2.0, an upgrade that is expected to make the Ethereum network more scalable, secure and sustainable.
At last check, Ethereum was down 4.04% at $2,623.78. Bitcoin meanwhile has dropped 4.03% to $38,266.14 at the time of publication.
Photo: Courtesy of TechCrunch on Flickr
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