The cryptocurrency bear market has been dragging on for 14 months, beginning in January 2018 when the parabolic advances of the previous year came to a grinding halt.
The bull market that preceded it was spurred by a hype-driven Initial Coin Offering (ICO) revolution that saw companies capitalise on a new wave of capital fundraising.
Coin Rivet recently spoke to the honest and upfront CEO of Pillar Project David Siegel, who has experienced the highs and lows of starting a company at the height of a bull market and the subsequent period of consolidation after raising $20 million in July 2017.
Pillar’s amount raised was dwarfed by the likes of FileCoin, who raised more than $250 million in 2017, while it wasn’t uncommon for other projects to eclipse the $100 million mark.
Snapshot of funds raised for ICO's in 2018
2019 – the year of the STO? pic.twitter.com/nNMzTaIxE6
— Alex Libertas II (@alexlibertas2) February 24, 2019
The increased open-interest surrounding ICOs came after the success of projects like Ethereum, which went from raising $16 million during an ICO to hitting a market cap of $133 billion a few years later.
Get rich quick or just a bubble?
The potential of high returns in a short space of time allured an eclectic mix of new investors, many of whom had no concept of how blockchain technology would disrupt industries or even how to invest in general.
For many, it was a tough lesson in choosing the right time to invest in a project. Since Bitcoin’s all-time high of $20,000 in December 2017, the entire cryptocurrency market cap has fallen from more than $800 billion to less than $130 billion, with the vast majority of altcoins losing 95% of their value, demonstrating clear signs of a painful bubble.
But it wasn’t just the investors who have been hit hard by the gruelling bear market; the companies who raised funds in 2017 have also faced the daunting prospect of their capital being wiped away, with liquidating cryptocurrency into fiat proving to be increasingly difficult.
How have companies dealt with losing funds?
“It’s been difficult,” says David Siegel, who spoke to Coin Rivet at the recent London Blockchain Week. “We held Ethereum when it was high, we tried to get out but no one was doing KYC. It was very hard as the banks kept saying no. Exchanges could exchange the Ethereum but banks wouldn’t take the money.”
Pillar’s CEO continued by saying that the difficulty of liquidating funds into fiat has been a common theme among many ICOs.
“Many ICOs have had the same problems,” he added. “I met a company last week that raised the same amount that we did and they have as little as we have now.”
Siegel’s solution to keep Pillar Project running is simple: “We have to find new ways of raising money.”
The bear market has dug its claws into a number of cryptocurrency projects over the past few months, with ShapeShift having to lay off 37 members of staff while ConsenSys confirmed that 13% of their staff have been made redundant.
Speaking on how hard the bear market has been for Pillar, Siegel admitted that “the budget has gone way down,” before revealing that “the monthly burn rate has been cut in half.”
“We magically need a bunch of rich donors who can give us around $10 million a year and that would be great,” he joked, amid nervous laughter.
Has regulation halted innovation?
Regulators in the US and across the globe have been clamping down on cryptocurrency projects over the past year, with several ICOs including Airfox and Paragon being slapped with penalties by the SEC.
Zachary Coburn, founder of decentralised exchange EtherDelta, which was the first exchange to list the Pillar token, was also charged by the SEC for “operating an unregistered exchange.”
In light of the ongoing regulatory crackdown and in response to the question of whether it will halt further innovation, Siegel responded: “I think it already has, big time.”
He added: “I think they have done tremendous damage, and much of it in the last eight months. They say ‘this project looks fishy, let’s investigate it,’ which means every project can be captured by regulators. What isn’t a target now for the SEC? If you’ve sold an ICO to one American, the SEC can bring you in and shut down your project.”
The UK’s regulator, the Financial Conduct Authority (FCA), is also looking at setting up some regulatory frameworks around cryptocurrency this year, but Siegel believes their effort may be in vain, with investors not being protected outside of crypto.
“What makes me sad is that regulators aren’t doing a good job to keep people safe outside of crypto. I challenge regulators to present evidence that what they do works, because a lot of it is just red tape and bureaucracy, and there are still major hacks and violations. There are still billions of dollars in fines to customers of banks and insurance companies. We are trying to do the right thing, and they’re trying to maintain the status quo, which is not particularly beneficial.”
What’s next for Pillar Project?
Pillar released its long-awaited Pillar Wallet in December, with native apps launching on the iOS and Android app stores.
The app, which acts as a personal data locker that securely manages digital assets, was the first major product release since the July 2017 ICO.
When asked about the upcoming offers engine, which was scheduled for release in Q4 2018, Siegel said: “That will start with the exchange. It’s coming, there are a lot of legal regulatory hurdles we need to overcome. I would love the exchange to be available to Americans, but I don’t think we’re going to be able to do that, at least not initially, until our lawyers sign off on it. Everyone will have to do KYC.”
He continued: “We’ve published a roadmap recently that’s pretty ambitious – we can never say when because our engineering team is good but not fast, but if we can achieve all of that this year that will be pretty exciting.”
? The #PillarWallet is LIVE on iOS and Android!
— Pillar Project (@pillarwallet) December 19, 2018
Although he remains confident of achieving the milestones set in the roadmap, Siegel reiterates that Pillar will “definitely need to raise more capital” in order to keep operating.
“We will definitely need to be raising more capital. We hope that token economics can start to move, and the token starts to move and have a higher exchange rate. But realistically, if it goes up too much then speculators will come in again and regulators will come back to us. The economic model needs more alternative sources of income for us, so we’re looking at a bunch of possibilities.”
He concluded the discussion by talking about an unexpected revenue stream, the Pillar Academy.
“One thing I want to ask is for more people to join the Pillar Academy,” he added.
“It’s a movement of young people to try and solve the big problems of the world. If it gets going it will become its own charity, because it’s meant to be non-profit. That could invite a lot of donations, and that’s another way the Pillar Project could get more money.”
“Pillar Project is the software side, Pillar Academy is the community of world changers who want the next 30 years to be much different than if today’s trajectory continues to run.”
To watch the video interview with David Siegel, click here.