Navigating the Bear Market with Joel John: Insights on Web3, NFTs, and the African Crypto Ecosystem

In a recent episode of the Super Team podcast, Joel John, a principal at LedgerPrime, shared his insights on navigating the current crypto bear market, the future of Web3, and the potential of the African crypto ecosystem. As an early Bitcoin adopter in India and now based in Dubai, Joel brings a wealth of experience and a unique perspective to the conversation.

The Current State of the Crypto Winter

Joel begins by addressing the current state of the crypto market, noting that this downturn has been remarkably swift compared to previous bear markets. He observes, "This is the fastest that I've seen a drawdown or change in sentiment within a 30-day period in like five, six years of being in crypto." This rapid shift has caught many off guard, particularly following the collapse of high-profile projects like Terra/LUNA and Celsius.

However, Joel points out that the full impact of the bear market has yet to be felt by many startups in the space. He predicts, "Startups will feel the pinch maybe two, three months out, right? Like that's when we'll see more layoffs, startups shutting down. That's when you see winter."

Survival Strategies for Crypto Founders

For founders navigating these turbulent times, Joel emphasizes the importance of survival. He draws an analogy to nature, stating, "The only thing that matters during a bear market is survival. If you can survive, you have a larger portion of the market share, which basically makes sure that you have a dominant position in the next cycle."

Key advice for founders includes:

1. Focus on survival for the next two years
2. Communicate honestly with stakeholders about the company's situation
3. Be clear about potential outcomes, including the possibility of shutting down

Joel highlights the importance of transparency, warning against giving false impressions of a company's health. He advises, "If you're as honest about how messed up things are at, right from day one, you can either get people to be working twice the size as hard for survival, or you can be very clear about, this is what's going to happen."

Resetting Expectations in the Bear Market

The conversation then turns to the need for resetting expectations in the current market conditions. Joel points out that many projects are currently undervalued, with some firms having more cash on hand than their current market capitalization. He advises against using token prices as the sole measure of a project's value, especially during bear markets.

For investors, Joel recommends looking beyond short-term price fluctuations and focusing on the quality of the team and their ability to communicate effectively during difficult times. He states, "I think what I look for in a bear market is, can I really tolerate this team and this founder when things are really, really bad, right?"

The Evolution of the Indian Crypto Ecosystem

Reflecting on the changes in the Indian crypto ecosystem since 2018, Joel notes that while there are more similarities than differences, the current cycle has seen a significant increase in the sophistication of talent entering the space. He observes, "The younger folks, they're not looking to make a quick buck. They are seeing this as their career path."

This shift in mindset, with more people viewing crypto and Web3 as long-term career opportunities, makes Joel optimistic about the future of the industry in India and beyond.

Web3 Use Cases and the Future of NFTs

When discussing Web3 use cases, Joel emphasizes the importance of looking at the entire infrastructure stack, not just consumer-facing applications. He provides an example of how Web3 could revolutionize the music industry by enabling direct funding from fans, transparent royalty distributions, and global IP rights management.

Joel explains, "If we had a thing of a Web3 native, Spotify, one thing I would say is like, let's say it's Tanmaya, not share release, a track. Now what they could likely do is, the first thing is they could directly raise money even before the track is released. So you could just issue NFTs to whoever gave you money to do that. And you can say that whoever holds this NFT gets a stream of the streaming royalty that comes."

Regarding NFTs, Joel sees their future beyond the hype of expensive digital art. He envisions brands using NFTs to identify and reward power users, create exclusive communities, and enable new forms of customer engagement. He states, "Think of NFTs as a participation certificate that have now gone on chain. Why? Because it unlocks new customer perks."

The Potential of the African Crypto Ecosystem

Joel expresses great interest in the African crypto ecosystem, noting its similarities to India's ecosystem in 2012-2013. He points out that while significant venture capital has flowed into African startups in general, the Web3 sector remains underinvested.

He observes, "Of global venture capital money, about five to six billion has actually gone to startups in Africa, but when you take specifically the web three ecosystem of 50 to 60 billion, only 170 million has gone, right?" This disparity represents a significant opportunity for investors and entrepreneurs alike.

Market Making in Crypto

As a principal at LedgerPrime, which operates as a market maker, hedge fund, and venture fund, Joel provides insights into the world of crypto market making. He explains the different types of market-making agreements and offers advice to founders negotiating with market makers.

Joel emphasizes the importance of aligning incentives and avoiding giving too much control to any single market maker. He advises, "Ideally you have a player that is, if it is an entity like ours, you have a player that has been with you right from seed stage, has meaningful ownership to go ahead and say, hey, we'll market make it for free."

The Role of Grants in Web3

Joel highlights the significance of grants in the Web3 ecosystem, noting that they provide non-dilutive capital for early-stage projects and experiments. He explains, "If there is a founder that's doing something cool and we want to validate it without necessarily going through paperwork or six months of time or talking to 15 investors, we just give them capital. It's like go do AB testing. See if this works."

This approach allows for rapid experimentation and can lead to significant outcomes. Joel cites examples such as Uniswap, which started as a grant project and later became a multi-billion dollar protocol.

Bootstrapping an Angel Fund with Labor

An interesting concept Joel discusses is the possibility of bootstrapping an angel fund through labor rather than capital. He suggests that talented individuals can apply for grants from multiple projects, accumulate tokens as payment, and effectively build a portfolio of investments over time.

This strategy allows those without significant capital to participate in the upside of promising projects. However, Joel cautions that this approach requires careful project selection and a willingness to weather market volatility.

Conclusion: Embracing the Bear Market as an Opportunity

Throughout the conversation, Joel emphasizes that bear markets, while challenging, present unique opportunities for growth, learning, and positioning oneself for the next bull cycle. By focusing on survival, honest communication, and building valuable products and services, entrepreneurs and investors can navigate the current downturn and emerge stronger on the other side.

As the crypto industry continues to evolve and mature, the insights and strategies shared by experienced players like Joel John become increasingly valuable. Whether you're a founder, investor, or enthusiast, understanding the dynamics of bear markets and the long-term potential of Web3 technologies is crucial for success in this rapidly changing landscape.

Facts + Figures

• Joel John observes that the current crypto downturn is the fastest change in sentiment within a 30-day period in his 5-6 years in crypto.
• Startups are expected to feel the full impact of the bear market in 2-3 months, with more layoffs and shutdowns anticipated.
• Of the $50-60 billion invested in global Web3 ventures, only $170 million has gone to projects in Africa.
• The total venture capital investment in African startups is around $5-6 billion.
• Joel's firm, LedgerPrime, has made about 75 investments, with 47 being DeFi-native investments.
• Uniswap, which started as a grant project, was valued at $5 million at its peak.
• Joel suggests that market makers should typically receive no more than 1% of a token's supply as compensation, with 0.5-0.1% being a healthier benchmark.
• The Indian crypto ecosystem has seen a significant increase in the sophistication of talent since 2018.
• Joel estimates that there is potentially $4-12 billion available in grants for Web3 projects, though this figure may have decreased due to market conditions.
• NFTs are seen as a way for brands to identify and reward power users, potentially airdropping to the first thousand most active users.

Questions Answered

What is the main difference between the current crypto bear market and previous ones?

The current crypto bear market is characterized by an exceptionally rapid change in sentiment. Joel John notes that this is the fastest drawdown he's seen in a 30-day period in his 5-6 years in the crypto industry. Unlike previous downturns where the impact was gradual, the current market has seen abrupt changes following events like the collapse of Terra/LUNA and Celsius, giving people less time to adjust to the new reality.

How should crypto founders approach the bear market?

Crypto founders should focus primarily on survival during the bear market. Joel advises founders to be honest and transparent with stakeholders about the company's situation from day one. This approach allows teams to either work harder for survival or prepare for potential outcomes, including shutdown. The key is to maintain enough runway to capture a larger market share when the next bull cycle begins, positioning the company for future success.

What are some promising use cases for Web3 technology?

Joel highlights several promising use cases for Web3 technology, particularly in the music industry. He describes a scenario where artists could use NFTs to raise funds directly from fans before releasing tracks, offer streaming royalties to token holders, and manage global IP rights more efficiently. Additionally, he sees potential in using Web3 technologies for customer engagement, allowing brands to identify and reward power users through NFTs and create exclusive communities.

How does the African crypto ecosystem compare to other regions?

The African crypto ecosystem is described as underinvested, particularly in the Web3 sector. While about $5-6 billion in venture capital has gone to African startups overall, only $170 million has been invested specifically in Web3 projects out of a global total of $50-60 billion. Joel sees similarities between the current African ecosystem and India's ecosystem in 2012-2013, suggesting significant growth potential for the region in the coming years.

What advice does Joel offer for negotiating with market makers?

When negotiating with market makers, Joel advises founders to seek partners who have been involved from the seed stage and have meaningful ownership in the project. For new projects, he suggests that market makers should typically receive no more than 1% of a token's supply as compensation, with 0.5-0.1% being a healthier benchmark. He emphasizes the importance of aligning incentives and avoiding giving too much control to any single market maker to maintain the project's decentralization.

How can individuals bootstrap an angel fund without significant capital?

Joel suggests that talented individuals can bootstrap an angel fund through their labor by applying for grants from multiple Web3 projects. By working on these projects and receiving payment in the form of native tokens, one can accumulate a portfolio of investments over time. This strategy allows those without significant capital to participate in the potential upside of promising projects, though it requires careful project selection and the ability to weather market volatility.

What role do grants play in the Web3 ecosystem?

Grants play a crucial role in the Web3 ecosystem by providing non-dilutive capital for early-stage projects and experiments. Joel explains that grants allow for rapid validation of ideas without the need for extensive paperwork or lengthy investor negotiations. This approach enables quick experimentation and can lead to significant outcomes, citing Uniswap as an example of a grant project that became a multi-billion dollar protocol.

How has the Indian crypto ecosystem evolved since 2018?

The Indian crypto ecosystem has seen a significant increase in the sophistication of talent since 2018. Joel observes that younger individuals are now viewing crypto and Web3 as long-term career paths rather than just opportunities for quick profits. This shift in mindset, coupled with more traditional investors entering the space, has led to a more mature and developed ecosystem compared to the previous cycle.

What is Joel's perspective on the future of NFTs?

Joel sees the future of NFTs extending far beyond expensive digital art. He envisions brands using NFTs to identify and reward power users, create exclusive communities, and enable new forms of customer engagement. He describes NFTs as "participation certificates" that have gone on-chain, unlocking new customer perks and enabling more direct relationships between brands and their most engaged users. This view suggests a more utility-focused future for NFTs integrated into various aspects of consumer engagement and loyalty programs.