Recommended Reading for Sunday | Don’t be Discouraged: A Guidebook for Cryptocurrency Entrepreneurs in the Bear Market

Author| Qiao Wang

Translated and compiled with authorization by Wu

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In a very different phase of the market cycle, after working with over 100 founders at Alliance, I’ve learned new experiences about what makes crypto startups succeed or fail. These lessons can be distilled into 4 key points.

Easy to acquire, hard to retain

Relatively speaking, acquisition is easy because it’s directly correlated to how much time and money (and tokens) you put in. The more resources you spend acquiring users, the more users you get. Often you can accurately trace where they came from, so you can double down on effective acquisition strategies.

But just because users come, it doesn’t mean they stay. Everyone should know this by now after all the failed liquidity mining schemes and retroactive airdrops we’ve had in our industry since DeFi Summer.

Once I was speaking to a founder who was worried about their lack of user growth and blamed it on their marketing department. I asked a simple question, do you measure retention rate? Or NPS? Or conduct PMF surveys? The founder said he didn’t. A week later he came back with the numbers I asked for, and it was clear that the problem wasn’t with his marketing, it was that his users weren’t sticking around. Frankly, his product sucked.

It turns out that many startups are on the same boat, not even realizing that their product sucks. As a result, they waste time on the wrong things.

Quantitatively and qualitatively track your PMF. Measure the above metrics and trust your intuition by extensively talking to users. Realizing you have a problem is a good start.

If you fail 5 years from now, it’s unlikely to be because you didn’t acquire users well. It’ll be because your user retention sucks. YC’s mantra of “make something 100 people love, not something a million people kind of like” is what this means.

Finding a product-market fit doesn’t require a lot of money and manpower

On the contrary, excessive fundraising and over-hiring are among the most common reasons for failure of crypto startups before any product-market fit signs emerge.

Despite the bear market, our industry is flush with risk capital, and many venture capital firms are extremely insensitive to valuations. Many startups raise eight-figure seed rounds not because they should, but because they can.

The result of having too much money in the bank is that founders spend all day thinking about how to spend it, how to hire more people, how to manage them after they’re hired, how to unify everyone’s vision in a bloated organization, instead of focusing on the one thing that matters: product-market fit.

As your team grows, you’ll feel good about it. It satisfies your ego. But team size is entirely vanity. Product-market fit is usually not a problem you can solve by simply throwing more bodies at it. Usually, only a few people really drive the organization’s development, and they do it by conducting rapid experiments in sequence, not in parallel.

The only exception I can think of in crypto is if you’re building an edge-case distributed system like an L1 public chain. But even then, Solana, the leanest in terms of funding and headcount among the other “ETH killers” during the last bear market, still stands out.

When you’re overwhelmed by the number of problems in your organization, the best solution is not to hire more people but to reduce the workload. Prioritize, focus, ignore. Only consider scaling when you start to see signs that users really love your product.

It may take 6 to 24 months to find effective methods.

Building real expertise in crypto, ultimately gaining a deep understanding of your users, takes time. This is because crypto is so counterintuitive.

Building an app that can’t be stopped by API or cloud providers? Wiring more than $10,000 without getting an annoying phone call from your bank asking why? Providing liquidity using algorithms on par with professional market makers?

I’m sure the founders who are new to crypto have heard of these things before, but to fully understand the subtle differences between them, you need to immerse yourself in the active users of existing products and become obsessed with talking to users. If you’ve built a DeFi protocol or an NFT marketplace and haven’t become resilient or met resilient people, sorry, you’re not going to succeed quickly, because that means you haven’t immersed yourself in crypto.

I can’t remember how many new crypto founders with amazing Web2 or TradFi backgrounds tend to project their existing experience onto crypto, more specifically mapping existing Web2 or TradFi products onto crypto. Just because a product exists in Web2 or TradFi doesn’t mean it solves the real pain points in crypto. Top crypto products are built by crypto natives, and that’s no coincidence: Ethereum, Metamask, Uniswap, Opensea, you name it. First principles thinking is greatly underrated.

Understanding crypto deeply takes time, but once you do, you have an unfair advantage over competitors. Unfortunately, many founders give up before they reach that critical moment, which leads to the next point…

Survive long enough to get lucky

It’s worth noting that every bear market is eerily similar. Founders and investors fret over the same three things. “We still don’t have a killer app.” “The market is too small.” “Regulation will kill crypto.” Then they exit crypto.

Let’s address these points first. Every person I know who quit crypto during the last bear market regrets it.

“We still don’t have a killer app” is a statement typically made by those who have never been to a developing country. If you spend more than a few hours outside the G7, the odds of encountering someone who uses BTC as uncensorable wealth storage or USDT as a hedge against inflation approaches 100%.

“The market is too small.” Today, the reason the market feels small is almost definitional: the market isn’t the 8 billion people on Earth; it’s the subset of them who have crypto wallets. The enormous friction of installing a wallet is what creates artificial barriers between the crypto market and other markets. But everyone in this space is betting on the same trend that’s been true for the past 14 years: the number of daily active wallets has fluctuated but overall grown monotonically.

“Regulation will kill crypto.” This is precisely why we need to double down. Powerful technologies like crypto, AI, and the internet cause fear among those in power. The US may seek to kill crypto, but other jurisdictions like Dubai and Hong Kong openly embrace it. With or without adversarial jurisdictions, crypto will thrive.

Finally, let me recap the story of Opensea. During the last bear market, Opensea had at least three competitors. These four NFT markets had little differentiation in their product offerings and none had a significant advantage. However, the bear market was so brutal that all three competitors folded, leaving OS as the only survivor. The rest is history. OS persevered through the dawn of the NFT bull market in early 2021 and emerged as the sole competitor, quickly rising to unicorn status.

If it’s not clear yet, each of these four lessons is related to a product:

  • Not realizing your product is bad

  • Overextending before having something people love

  • Not understanding your users deeply enough

  • Turning away at the worst time

In fact, this has become a cliché, but the product is the most worrisome thing. It’s too early to be obsessed with anything else, whether it’s token economics, recruiting, marketing, or community management, before you have a product people love.

Appendix: Tactical Advice

However, if you’re curious about things outside of the product, keep reading. These are topics that repeatedly come up during Alliance office hours.

It’s important to remember that there is no one best way to build a cryptocurrency startup, but these are the statistically effective methods.

Sales, Growth, and Marketing

Avoid external marketing agencies. According to insights shared by founders who have used such services, successful cases are rare. Instead, choose internal marketing work. Use your investors to amplify your message and connect you with the media.

If your product is aimed at businesses or developers, content marketing is by far the most scalable way to build a funnel top in cryptocurrency.

If your product is aimed at consumers, tokens are the most scalable user acquisition strategy. But you can only use this weapon once.

Cryptocurrency conferences can be a good channel for enterprise or developer product user acquisition. They’re a waste of time for consumer goods.

It can be challenging to get featured on major podcasts and conferences as they often seek big names. Early-stage startups are not established names by definition. Instead, focus on writing high-quality content to gain recognition.

The goal of fundraising announcements and other large-scale marketing activities is not to attract potential users, but rather to attract potential employees. Future employees will do their due diligence and see such announcements.

Twitter is a lagging indicator of your success, not a leading indicator. So, don’t get too obsessed with it.


So far, leveraging your personal network is the most effective way to recruit talent, especially in the early stages when your brand may not be enough to attract external candidates. List the best people you know and pitch your startup to them. Encourage everyone on the team to also use their personal networks for recruiting.

Your community, such as Discord, Telegram, Twitter, or newsletters, is the second-best channel. Ask if anyone or their connections are interested in working with you.

Only after exhausting personal networks and community relationships should you consider using crypto-specific recruiters or recruiting platforms.

Consider hiring experienced Web2 engineers and training them for Web3 roles, as experienced Web3 engineers may be hard to come by.

Community Management

An actively engaged community doesn’t bring great products, an actively engaged community is a result of a great product.

Telegram works for business and developers, Discord works for consumers.

If you are a consumer product, the focus is not on optimizing community engagement and activity but rather treating your community as users. Seek feedback, conduct beta testing, address pain points, update progress and roadmaps, and educate them on how to use the product.

In the early stages, one of the founders should serve as the community manager.

Token Economics

Token incentives should be seen as a go-to-market strategy. But if there is no product people love, token incentives are a waste because users will just dump the tokens and move on.

Launching token incentives too early can hinder your understanding of true product-market fit. You don’t know if users are coming for the product or for the financial incentives.

Tokens can be a double-edged sword for your community and employees. In a bull market, rising prices can increase excitement and participation. In a bear market, falling prices can lead to morale problems. This is no different from public companies.

Do not try to predict the market. Launch your token in a bear market as much as possible. You want your token to rise over time, and the way to do that is to start from a low point.

You will never get the right token design on the first try, and you will inevitably change direction after seeing things happen.

Overdesign should be avoided. Avoid multi-year perspectives. Avoid luxury rewards. Use tokens simply, intermittently, and moderately.

While you should draw inspiration from leading products in specific vertical fields, you should design your token from first principles based on the unique needs of your product. Each product is different, so each token should be designed differently. Remember, tokens are a listing strategy, so whether a listing strategy makes sense depends on the specific product.

I still have reservations about hiring external token consultants. If you plan to hire someone, you should create a draft and use them only as independent feedback sources. Token design is not rocket science, and no one knows what the best design should be except you, who knows your users better than anyone else.

Contact the exchange as early as possible to list as soon as possible. They all have different requirements, and their requirements have changed greatly over time. Their requirements usually directly affect your token design.

Hire experienced legal professionals as early as possible. Understand that issuing tokens involves browsing securities laws and other related regulations. The best way to find excellent lawyers is to seek advice from your peers and investors.

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