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Good morning. Here’s what happens:
Prices: Bitcoin fell below $23K earlier on the weekend and was flat on Sunday as investors await further announcements from Federal Reserve Chairman Jerome Powell.
Statistics: If the cryptocurrency continues to recover, venture capital in blockchain projects is likely to increase. Will venture capitalists be able to avoid their past investment mistakes in the blockchain space?
CoinDesk Market Index (CMI)
−14.6 ▼ 1.3%
−208.2 ▼ 0.9%
−21.7 ▼ 1.3%
−43.3 ▼ 1.0%
+16.7 ▲ 0.9%
+107.4 ▲ 0.4%
BTC/ETH Prices by CoinDesk Indices as of 7:00 AM ET (11:00 AM UTC)
Crypto trades flat as investors wait for Powell’s speech and additional returns
Prices for major digital assets traded flat over the weekend, with bitcoin down 1.7% and ether down 2.3%.
After a mediocre start to the reporting season, investors are thought to be looking forward to Federal Reserve Chairman Jerome Powell’s speech scheduled for Tuesday afternoon before making any serious moves.
FactSet data shows that less than 1% of S&P 500 companies reported earnings that exceeded estimates. This is below the five-year average (8.6%) and the 10-year average (6.4%).
“As a result, fourth-quarter revenue declines are larger today compared to the end of last week and compared to the end of the quarter,” FactSet Senior Earnings Analyst John Butters wrote in Friday’s market update. “If the index reports an actual decline in earnings for the fourth quarter of 2022, that would be the first annual decline in earnings reported by the index since the third quarter of 2020.”
Speaking on CoinDesk TV late last week, David Seamer, CEO of accounting software provider Wave Financial, said the market is giving mixed signals — strong job numbers but mediocre earnings results — and it still expects a recession this year. , although weak. .
“I’m a little more optimistic that the recession won’t be as severe as it was during a great recession or a big, big recession,” he said, pointing to consumer resilience. “Just because the Fed’s actions are having such a slow effect doesn’t mean that they won’t have a big effect in the long run. We’re probably still a quarter or two minutes away from seeing what the Fed’s actions have really done to the economy.”
And what does this mean for cryptocurrency prices in the future? Joe DiPasquale, CEO of crypto fund BiBull Capital, wrote in a note to CoinDesk that crypto markets are “optimistic” after a small rate hike and Bitcoin “will be hovering around the $20K support level over the next few months barring other unforeseen events.” events. and market action.
Meanwhile, the US Dollar Index (DXY) opens the Asian trading week at 103.12, remaining in what many analysts call a “defensive” stance. The world’s largest fiat asset has been on the rise for much of the past year, hitting stock and crypto prices hard. Since the beginning of the year, it has decreased by 1.4%.
Will venture capitalists be able to avoid the mistakes of the past year?
The final quarter of 2021 marked the end of an unprecedented bull market that began a year earlier with macroeconomic policies including Covid and ended with a Fed rate hike in 2022 and three crashes, most notably by cryptocurrency exchange FTX and its trading arm. Alameda research. VCs have enjoyed the ride on the way up but have certainly felt pain on the way down in 2022 as cascading failures have blown the wind out of their portfolios.
For the industry, the trillion-dollar question will be: have VCs learned anything and can they avoid repeating the mistakes of last year that severely hurt their bottom line. Venture capitalists invested furiously as the price of cryptocurrencies rose, but their methods often seemed sloppy.
Bitcoin and many categories of altcoins had a fantastic January, with the world’s largest digital asset up 40% on the month, some metaverse tokens posting triple-digit gains, and tier 1s like APT Aptos up over 300%. Some of the more optimistic forecasts even predict that Bitcoin will hit $45,000 by Christmas.
But despite this data indicating that the cryptocurrency winter is thawing, according to a recent report from CoinDesk, venture capital investment in digital asset and blockchain projects fell by 90% in January.
“In the past 18 months, venture capital investment in cryptocurrencies has peaked, with investment spreading throughout the ecosystem. Due diligence cycles were compressed into weeks and sometimes days during that time, and many investors avoided the round if they asked crypto startups to follow additional due diligence questions (which is partly why FTX was not properly due diligence),” said Robert Le, senior analyst at new technologies in Pitchbook, in a CoinDesk email.
Le said there has been a significant slowdown in the speed at which venture capitalists close deals over the past six months, with the review cycle now taking months.
“Currently, capital is concentrated in areas with business models and a commodity market. There is also less interest in pure token rounds as many investors prefer equities,” Le said.
Throughout the 2020-2022 bull market cycle, many observers found it almost comical how many projects of dubious value, teams with negligible skills, and projects not up to the mark received a seemingly endless bucket of funding.
The statistics are sobering: CertiK says more than $3.7 billion worth of tokens were stolen, scammed or attacked in 2022; over $2.8 billion was raffled off in 2021, a term for teams hiding with investor tokens.
“Investors were very willing to take on risk, bet on research and niche products, and be optimistic about the space,” Nate George, co-head of venture capital at Cumberland, told CoinDesk.
George said investors put up with poorly drafted legal documents with extremely limited investor protection just to get into the sector. In turn, throughout the 2021-2022 cycle, the funds have taken a “silvered approach” to investing, with large groups of investors writing small checks, demonstrating their low commitment to the project.
In fact, everyone who wanted it received funding.
“Startups have been able to raise uncharacteristically high volumes of rounds for their stage, typically acquiring several years of runway pre-production, while over the past six months, investors have been making fewer deals aimed at higher conviction and more concentrated bids.” George said. CoinDesk in a note. “During this time period, investors began to reassess their focus on what constitutes product-to-market fit, realizing that large token incentive programs that reward user participation create skewed traction metrics and lose sight of user loyalty.”
Moving into the spring
Nowadays, investors have to think about many things. On the one hand, there’s a lot of data – in the form of blood-red losses on the income statement – that shows that a slower approach to high-conviction investing is better for both the industry and the fund’s bottom line.
But at the same time, it is altcoin season. SHIB is up almost 50% last month. Metaverse tokens, despite the dubious appeal of platforms like Decentraland, perform very well.
CryptoRank data shows that smaller, more flexible funds are making triple-digit returns.
And what are they investing in? Lesser known protocols. Things that rise quickly and fall hard. Items that will be part of the scatter portfolio.
This does not mean that the largest funds have been doing poorly in the last month.
Coinbase Ventures, which according to Pitchbook has been very busy during 2022 with 121 deals, has grown its token portfolio by 56% in the last month. Andreessen Horowitz (a16z) is about the same. The fate of Animoca Brands, which was rumored to be in serious financial trouble late last year, has changed dramatically.
But which thesis will win?
09:00 HKT/SGT (01:00 UTC) Eurozone Retail Sales (YoY/Jan)
22:30 HKT/SGT (14:30 UTC) Japan Total Household Spending (YoY/Dec)
02:30 HKT/SGT (18:30 UTC) Reserve Bank of Australia Interest Rate Decision
In case you missed it, here is the most recent “First Mover” episode on CoinDesk TV:
Bitcoin is hovering around $23K as 517K jobs were added in the US in January; Sam Bankman-Fried negotiates bail terms
The first US jobs report for the year showed that nonfarm payrolls rose by 517,000 in January, while the unemployment rate remained virtually unchanged at 3.4 percent. What does this mean for crypto? Wave Financial co-founder and CEO David Simer joined the conversation. McMillan LLP partner Benjamin Bathgate, LevelField Financial CEO and Chairman Gene Grant II, and Catawba Digital Economic Zone CEO Joseph McKinney also joined First Movement.
Bitcoin market sentiment is the most bullish in 14 months as the US employment report is expected: The cost of holding a bullish long position in bitcoin-pegged perpetual futures jumped to its highest level since the heady bull market days of late 2021.
India reports that the IMF is working with the G-20 to regulate cryptocurrencies: Ajay Seth, secretary of the Department of Economic Affairs, stated that crypto assets are not illegal in the country.
Created by Jack Dorsey, the social network Nostr’s Damus App is banned from the Chinese App Store: Apple’s notice states that Damus “includes content that is illegal in China.”
Binance returns to South Korea by purchasing a majority stake in the GOPAX crypto exchange: This acquisition means that Binance will re-enter the South Korean market, closing its branch there in December 2020 due to low usage.
Indonesia is again delaying the launch of a crypto stock exchange, this time until June, report: The government, which is in the process of changing cryptocurrency regulators, originally planned to roll out the trading platform by the end of 2021.