Crypto bear markets are rough times for traders and investors. Gone are the days when you’d wake to find your net worth increased by double-digit percentages and every token you touched turned to gold. Yet, there are still gems to be found in bear markets. Innovation happens every day in crypto and it doesn’t take much capital for a low-market-cap project to buck a bear market trend.
Bear market? What bear market? Hot tokens this crypto winter
Although the entire crypto market is around 70% down from its November highs, not all assets are struggling. Some are positively thriving and the industry is by no means dead. Recent transaction activity on Ethereum Layer-2 protocols, for example, is at an all-time high, which is encouraging given current market sentiment.
But why are some tokens able to buck the bear when just about everything else is deeply in the red?
Since June 2022, QNT, the native token to the Ethereum-based blockchain interoperability solution Quant Network, has surged from a daily low close at $44.40 to a high above $220 on some exchanges.
Binance’s QNT/USDT 1-day price chart. Source: TradingView.
Several factors appear to be fueling the almost 400% gain, including the Quant CEO’s credentials and speculation that the MIT-supported Quant Network might serve as critical interoperability infrastructure for Central Bank Digital Currencies.
Gilbert Veridian, Quant’s CEO, has the connections to put Quant Network in front of the right people to make it happen, too. An Oct. 17 tweet by an anonymous Quant enthusiast highlighted Veridian’s experience participating on state-level committees focused on distributed ledger technology.
Quant launching the first version of its tokenization product also galvanized recent interest in QNT. Tokenise, as the hybrid network is known, will enable developers to deploy the new QRC20 token standard across multiple blockchains.
On-chain activity picked up around the June launch as wallets holding between 100 and 1,000 QNT grew by 230,000 and daily active users doubled. The August launch of a Quant Network token standard also gave the rally more steam.
AllianceBlock is another hot project building through the bear. Its focus is also on interoperability only this time between traditional and decentralized finance. Since AllianceBlock aims to deliver DeFi products to traditional financial institutions, regulatory compliance is a top priority.
From a low on Oct. 3 of $0.037, AllianceBlock’s native token, ALBT, increased 132% to trade as high as $0.086. After a recent pullback, it now trades at around $0.06, which is still almost double its October low.
Uniswap’s 1-hour ALBT chart. Source: TradingView.
A recent announcement that AllianceBlock has become an Advisory Board Member for International Association for Trusted Blockchain Applications might explain ALBT’s price rally. INATBA works to liaise with global regulators to guide policymakers. Additionally, the group supports blockchain technology’s use in supply chain management and CBDCs.
AllianceBlock is also going after some of the crypto industry’s biggest pain points. A recent partnership with fiat-to-crypto swap aggregator Onramper looks set to transform the way users exchange traditional currencies for crypto assets. Such adoption would be bullish for the AllianceBlock protocol’s compliant decentralized finance ecosystem and the market has responded accordingly.
Recent events have forced many crypto industry participants to consider how regulators will approach the space. ALBT looks poised to take advantage of the trend toward compliance.
The token is the AllianceBlock DeFi ecosystem’s defacto medium of exchange, enables community governance and incentivizes participation in the decentralized network. Meanwhile, various token-burning mechanisms regulate its overall supply, meaning increases in demand have a greater upward impact on ALBT price.
Following Ethereum’s successful transition to proof-of-stake, staking service providers have been a hot decentralized application category. To actually operate a staking node requires 32 ETH and enough technical know-how to connect to the network and stay online enough to avoid penalties. What’s more, you can’t actually withdraw staked assets yet.
For the average ETH holder that just wants to generate returns on their investment during the bear market, that’s a lot of money and a big commitment. Services like Lido take deposits from users into smart contracts, enabling professional stakers to deploy assets on their behalf.
In addition to rewards, Lido users receive stETH, which is a token, backed one-to-one with staked ETH. Users can then exit staked positions or deploy stETH at another DeFi application, generating additional yield.
Lido’s LDO is a governance token for the project’s decentralized autonomous organization. A successful Ethereum merge in September would have likely meant many new Lido users, making DAO membership even more valuable. LDO’s token reflected that leading up to Ethereum’s historic consensus mechanism transition with a 600% rally from June until mid-August.
Huobi’s 4-hour LDO/USDT chart. Source: TradingView.
Spotting bear market gems
These examples show that gains are possible during a bear market — you have to be a little bit more selective.
If you identified that increased regulatory attention might be bullish for compliant projects, you might have backed ALTB or QNT. Perhaps easier would be LDO, given that the crypto story of the year was Ethereum’s merge and Lido provides highly adopted related infrastructure.