The coronavirus crisis affects more and more crypto companies worldwide. Numerous crypto companies from the Swiss Crypto Valley are currently particularly affected. Due to ongoing measures in a fight against the virus, the otherwise crisis-proof Crypto Valley is now coming under pressure and is dependent on the help of the state.
The canton of Zug is about to provide the companies with 20 to 30 million francs, while another 10 to 15 million francs are about to come from the federal government and an even larger amount from private investors. According to the Swiss Federal Council, the support package holds a total of CHF 154 million.
What is Crypto Valley: How Does Coronavirus Crisis Affect It?
The Crypto Valley is a slang term for a high concentration of crypto startups in the Swiss canton of Zug. Almost 100 new companies opened there in 2019. Today, there are over 840 companies, compared to 750 companies in 2018. The number of jobs also increased enormously, from approximately 3,300 to 4,400.
In addition to many rather smaller companies, the Crypto Valley also houses some unicorns. A unicorn usually means a company whose market capitalization has exceeded the $1 billion mark. These are Ethereum, Dfinity, Bitmain, Polkadot, and Libra.
However, today Crypto Valley is struggling to survive. A recent survey shows that 80% of all companies surveyed fear bankruptcy. Only half of the 50 largest companies expect to stay in business for at least a year.
According to various experts, the rescue package of over CHF 154 million won’t be enough to protect this industry. Because in addition to the coronavirus crisis, there is another problem that large investors have been giving up their holdings for some time.
What is the Future of Crypto Startups?
Anyone who has ever dealt with startups knows that 80-90% of all startups will fail within the first financial year. The crypto industry is emerging, innovative, and also attracts investors, but this basic rule of failure also applies here. The corona crisis further exacerbates this problem.
In the long term, the coronavirus pandemic could also bring growth. An increased work on blockchain-based FIAT currencies that are required by many banks or the development of tracing apps can be the main reasons. A crisis always holds opportunities.
Conclusion: Crypto Startups Have to Fight!
Undoubtedly, the coronavirus will cause economic damage to Crypto Valley. Startups face a lack of venture capital. In the next few months, you will be able to see how natural selection begins. Companies that were just looking for new financing, don’t have a strong business model, or simply aren’t innovative enough — might be affected.
We believe that Crypto Valley will be stronger at this stage. Of course, there will be losers as well. But others can take advantage of opportunities that arise to build a long-term successful company.