Chainlink’s Sergey Nazarov Says This Crypto Downturn Is Different

This time it’s different.

According to Sergey Nazarov, co-founder of Chainlink, this bear market is unlike any that have come before — and he thinks that’s a good sign for crypto.

Posting on X / Twitter on February 9, Nazarov wrote that ups and downs in the crypto market are to be expected, but what really matters is “what those cycles reveal about how far the industry has progressed and what next stage / trends of adoption / value creation will go on to define the industry.”

Nazarov argued that one of the things this bear market is revealing is that the industry is starting to mature and learn its lessons from previous downturns. Unlike previous bears, Nazarov said, this time around there haven’t been any catastrophic failures or institutional collapses, à la FTX circa 2022.

There have been no large risk management failures leading to large institutional failures or widespread systemic risks.

Sergey Nazarov, Chainlink co-founder.

“In the previous cycle you had FTX and multiple lenders cleaned out through large price drops, this time around I am pleasantly surprised to see none of that or at least none of it at any system wide scale,” he said.

A second revelation from this bear market, according to Nazarov, is that adoption of real-world asset (RWA) tokenisation is continuing to accelerate, even as crypto prices plummet. He said it shows that “real world assets on-chain is not tightly coupled to cryptocurrency prices but provides its own unique value that can grow irrespective of market pricing of Bitcoin or other crypto assets.”

He also noted that on-chain perpetuals trading has remained strong despite plummeting cryptocurrency prices.

“We’ve seen leading on-chain perp markets rival tradfi perp markets for very traditional commodities like silver, especially in periods when trading in permissioned traditional markets became harder or more risky vs trading in on-chain permissionless markets,” Nazarov wrote.

The Chainlink co-founder said these trends are “very positive signals” with the potential to “reshape our industry in the next stage of its growth into mainstream adoption.” If these trends continue, Nazarov suggests that tokenised RWAs could become more valuable than cryptocurrencies, causing the crypto industry to “fundamentally change.”

This shift will also lead to cryptocurrency’s growth as an asset class that benefits from more capital on-chain, but RWAs is how all of this goes mainstream.

Sergey Nazarov, Chainlink co-founder.

Related: ‘Weakest Bear Case in History,’ Analysts Proclaim

Chainlink Potentially One of the Most Undervalued Cryptocurrencies, Says Bitwise Analyst

Last month, Matt Hougan, Chief Investment Officer at asset manager Bitwise, wrote that Chainlink is “one of the least understood, most important, and possibly most undervalued crypto assets,” because of its central importance to emerging trends like tokenisation.

Chainlink is what’s known as an oracle — essentially a data provider that allows blockchains to access accurate and up-to-date off-chain data such as share prices or fiat currency values. Hougan wrote that in his opinion, “there will eventually be significant institutional demand for Chainlink ETPs.” 

“The reason is simple. It is the glue that connects everything institutions love about crypto,” he said.

Related: First-Ever Chainlink ETF Set to Debut on NYSE This Week

Hougan argued that Chainlink is an important part of many sectors of the crypto economy, including tokenisation, stablecoins, DeFi and prediction markets.

“Today, most of the ways in which crypto intersects with the real world flow through Chainlink,” Hougan wrote. 

“That’s why everyone—DTCC, SWIFT, JPMorgan, BNP Paribas, Visa, Mastercard, Euroclear, Fidelity, Franklin Templeton, FTSE Russell, Coinbase, Aave, Deutsche Börse, Polymarket, etc.—uses Chainlink.”