WEST PALM BEACH, FLORIDA - One topic dominated the conversation at Blockworks' Permissionless Conference last week: the collapse of Terra.
After the death spiral of UST and LUNA wiped $40 billion off the books, many conference topics naturally dealt with where the contagion might spread and who got hit.
"I think the damage is pretty much done," said Michael Tant, co-founder of crypto venture capital firm Citizen X. "A lot of people have been hit really hard, but we don't know the extent. The impact will start to diminish over the next few months."
CoinDesk spoke to a range of conference attendees, from venture capitalists to project founders to crypto developers. Almost all expressed concern about the collapse of Terra and its various impacts (market, regulatory, public opinion) on the industry.
"Yacht parties will be more subdued going forward," said Vance Spencer, co-founder of the $1.5 billion crypto venture capital firm Framework Ventures.
"I spoke at my first conference in mid-2018 and recently went back to look at the list of speakers," Spencer said. "Seventy-five percent of those people are gone. You'll see a lot of people leaving the room."
But the crypto crowds (and yacht parties) were certainly still on display at Permissionless.
Terra rough
As the conference approached, many ticket holders wondered what kind of presence Terra, a major sponsor, would have at Permissionless.
During CoinDesk's three-day presence, Do Kwon and the Terra team were nowhere to be found.
"I'm not surprised," one investor at the event told CoinDesk. "I doubt Do Kwon will ever set foot on American soil again. Just look at what happened last time."
Last September, at data firm Messari's Mainnet conference in New York, Kwon was subpoenaed by the U.S. Securities and Exchange Commission (SEC) before taking the stage.
A panel discussion on stablecoins on Wednesday that originally featured Kwon as the keynote speaker was continued, with MakerDAO lead developer Sam MacPherson replacing Kwon. MakerDAO is the platform behind DAI, the decentralized stablecoin that was UST's biggest competitor.
"There was a debate between the two communities for a long time," Luca Prosperi of MakerDAO told CoinDesk. "In the end, the MakerDAO construct has proven to be far more resilient, but we don't enjoy it because a lot of people lost a lot of money."
In another case, the opening day afterparty, originally supposed to be hosted by Terra, was instead sponsored by Avalanche, another blockchain that partnered with Terra last month.
"The Terra people had sent all their giveaways to the conference, they were supposed to be here with a booth," a permissionless sponsor told CoinDesk. "They came and picked everything up before the conference started because they didn't want it to be passed off as a meme."
What's next?
CoinDesk spotted an attendee wearing a T-shirt with the Terra logo. It was Terra developer Ivan Zundel, who said he had just flown from the Terra Hacker House in Chicago to attend the conference.
"There was a very festive atmosphere [at the Hacker House]," Zundel told CoinDesk when asked about the mood. "People didn't feel that motivated to build anything. Every day we just saw the price of LUNA drop and UST de-pegging."
"I'm not sure about the future of Terra," Zundel continued. "But I think the ecosystem was good, the builders are good. The problem is, if no one is using Terra, why build on it?"
CoinDesk also spoke to another algorithmic stablecoin project, USDN, called Neutrino Dollar, which is based on the Waves blockchain.
"USDN can't go into a death spiral like UST/LUNA did," said Coleman Maher, head of ecosystem at Waves Labs. "LUNA became hyperinflationary, while WAVES has a cap [on coin minting]."
Maher told CoinDesk that USDN is only supported by the WAVES token and that he remains confident in the project. This year, WAVES has risen more than 300%, reaching an all-time high of $62 last March before falling to $5.46 on Tuesday afternoon.
Prosperi of MakerDAO says the stablecoin game is a patient one.
"From the outside, Maker has always been perceived as a slow-moving giant," Prosperi told CoinDesk. "Innovation takes time, but we think it's very important for stablecoin providers to be prudent. There's value in being very careful about innovation."
Tightening the belt
For industry players, even those not directly affected by the collapse of LUNA, the poor market conditions seemed to have deflated the "easy money" environment for cryptocurrencies.
"There used to be a really friendly environment with a lot of $100- to $200-million Series A," said Framework's Spencer. "I think that's gone. If a project doesn't gain momentum after its seed round, it doesn't get another check.
If predictions of waning interest from venture capitalists prove true, founders could face a shortage of capital in the months ahead.
"Companies entered the new year with less than nine months of ramp-up time, expecting to raise a top-up round to support their irresponsible burn rates," said Bruno Faviero, co-founder of Magna, a token distribution platform. "Now they have to make tough decisions."
A conferee from a project that was in the process of raising a round with venture capital firm Hashed told CoinDesk they were looking for a new firm to lead the round. CoinDesk had previously reported that Hashed, a major investor in Terra, suffered $3.5 billion in losses from the debacle.
"I'm worried about some of the VCs that suffered big losses and are now forced to sell," Citizen X's Tant said. "Funds that got caught will try to book profits or get liquidity from other projects in their portfolios."
Other crypto players are more optimistic about a recovery, saying the current bear market will be less grim than the "crypto winter" of late 2018 to early 2020.
"Institutions have started buying crypto in the last 24 months," said Felix Hartmann, founder of crypto investment firm Hartmann Capital. "The interesting thing is that they haven't stopped. They're not saying, 'Phew, I dodged a bullet,' like they did in 2018."
Hartmann says institutions remain interested in crypto despite the Terra fiasco. Moreover, the stock market doesn't seem to be doing much better - another factor driving institutional interest in cryptocurrencies.
Hartmann quipped, "If Target drops 25% in one day, maybe crypto isn't so bad."
Cryptocurrency slowdown
Another key indicator of the health of the industry is the influx of developer talent - and there were at least anecdotal signs at Permissionless that this is also a variable affected by the market slowdown.
Previously, crypto broker Floating Point Group had a 100 percent job offer acceptance rate last year, according to co-founder Kevin March.
Since May 7, however, March said the company has received several rejections, with all rejected candidates stating it was "not the right time to get into the crypto space," according to the company's post-interview feedback process.
"We had an almost two-year perfect record," March told CoinDesk. "We were founded in the crypto winter of 2018. We know the game - it's time to build."
Kevin Owocki, founder of crypto funding organization Gitcoin, says not all building in crypto is equal and that the industry should focus more on "positive-sum plays."
"It behooves us to shift our attention and capital away from the latest decentralized casino and toward impact DAOs, projects that create positive externalities for the world," Owocki told CoinDesk.