Happy Friday Everyone! 👋
Some might say we’re in a crypto winter, others (including yours truly) have a different perspective on things. You won’t want to miss more on that below.
Despite recent market volatility, the industry marches on, taking on a prominent role at the World Economic Forum’s annual meeting in Davos this week where the town was overrun by crypto companies. Five years ago there was only 1 crypto firm present. Last week we noted that FTX had expanded its offerings to include stocks, now the crypto exchange is reportedly seeking acquisitions in the brokerage space. They have already held conversations with Webull, Apex Clearing, and Public.com. Finally, despite the stock’s poor recent performance, Coinbase became the first crypto company to crack the Fortune 500! The firm’s revenues for 2021 ranked 437/500.
Having said that…let’s get to it!
Preparing for crypto’s “golden era”
Chinese miners never stopped
New stablecoin favorite
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1. Preparing for crypto’s “golden era”
While the Peter Schiffs of the world prematurely celebrate crypto’s demise and the average retail investor hunkers down for a “crypto winter”, others are positioning themselves for the “golden era”.
Markets are down, volatility is up, and the economic outlook is uncertain…which is exactly when the best companies and protocols emerge—when short-term price fluctuations don’t distract from building.
To that end, Andreessen Horowitz (a16z) just launched another crypto fund—the biggest so far—pushing the firm’s total investment in the space to +$7.6B.
The new $4.5B fund will target both seed investments ($1.5B) and venture investments ($3B) in startups of all stages, including DAOs, decentralized social media, DeFi, NFT communities and creator monetization.
According to Chris Dixon (managing partner of a16z’s crypto arm), we’re entering a period where “new talent, viable infrastructure, and community knowledge” are set to spark rapid innovation.
I agree with Chris that now—with markets seemingly in turmoil—is the time to identify the tokens and protocols that have the staying power to emerge from the crypto winter as the leaders of the golden era.
To separate the winners from the losers.
In a few days, paid subscribers will be receiving our watchlist of the top cryptos we plan on building positions in over the coming months.
Subscribe here to join us in the hunt!
2. Chinese miners never stopped
Nearly one year ago Chinese share of crypto mining was 34.3%. That was in June 2021. By the next month, thanks to the government’s crackdown (ban), it was zero.
This made sense.
By September 2021, however, Chinese activity accounted for a 22.3% share of mining activity.
This didn’t make much sense.
A new report from Cambridge Centre for Alternative Finance (CCAF) confirms what many throughout the industry suspected all along—many miners never left.
New data suggests Chinese miners afraid of the government crackdown have been using virtual private networks (VPNs) to disguise their locations while continuing operations.
In fact, since the crackdown, Bitcoin’s hashrate (the network’s computational power) has actually increased by 40%.
This is thanks, in large part, to the growth in mining operations around the world (particularly in the US) that was spurred by the ban itself, but the increase also indicates that there may be even more Chinese mining taking place than is being reported.
3. New stablecoin favorite
The lingering effects of Terra’s collapse are still being felt throughout crypto and they’re are hitting the largest stablecoin the hardest.
But one stablecoin’s loss is quite literally another’s gain.
Since May 11, withdrawals from Tether (USDT) have surpassed $10B as investors’ confidence in its reserves—which include dollars, US Treasury bills, foreign government debt, commercial paper (short-term corporate debt), and even digital tokens—tumbles.
New data shows crypto whales have switched horses mid-race, funneling funds from Tether to its closest competitor and second-largest stablecoin USD Coin (USDC).
Since USDT lost its peg to the dollar on May 9, at least 147 addresses both increased their USDC holdings and decreased their USDT holdings by at least $1M. Among those addresses, 23 increased and decreased by at least $10M.
It appears USDC may be on its way to becoming the preferred stablecoin of the Ethereum blockchain.
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