Crypto is dead. Long live crypto

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On Wednesday, Andreessen Horowitz, Silicon Valley’s top venture capital group, made a $4.5 billion bet on what it called a “golden era” for cryptocurrencies, citing ” a massive surge of world-class talent” that has entered the industry in the past year.

“That’s why we decided to think big,” wrote Chris Dixon, the firm’s managing partner.

On the same day, a once-bullish investor made headlines by predicting that bitcoin could fall to $8,000 from its current level of around $30,000.

“Bitcoin and any cryptocurrency at this point haven’t really established themselves as a credible institutional investment,” Scott Minerd, chief investment officer of Guggenheim Partners, told Bloomberg News at the World Economic Forum in Davos. “It’s really become the market for a bunch of yahoos and backwaters.”

That’s quite a change since February of last year, when Minerd told CNN’s Julia Chatterly that he could see bitcoin, which at the time was trading around $40,000, finally climbing all the way up to “$400,000 to $600,000.”
Bitcoin hit its high of $69,000 in November. It has lost more than half its value since then as investors retreated from riskier assets in the face of rising interest rates.

Despite the crash, there were several signs about cryptocurrencies and digital money in Davos this year, not to mention a string of crypto-related vendors along the city’s famous promenade. But establishment voices at the top wasted no time bashing the web3 crowd.

“Bitcoin may be called a coin, but it’s not money,” International Monetary Fund Managing Director Kristalina Georgieva said on the first day of the event. “It’s not a stable store of value.”

So where do we go from here?

It’s easy to watch the daily volatility of crypto, as well as fringe projects like Terra and Luna enter a “death spiral” and reject the blockchain technology and philosophy behind them. But crypto devotees say that despite its problems, crypto isn’t going away.

On the one hand, according to some experts, crypto has to deal with its branding problem.

The term cryptocurrency can be misleading, Marcus Sotiriou, an analyst at digital asset brokerage GlobalBlock, told me.

“Ninety-nine percent of cryptocurrencies aren’t trying to be currencies — they’re trying to be assets behind these blockchain networks,” he said. “And I think it’s only a matter of time before all companies are integrating blockchain in one way or another.”

Calls are growing for tougher regulation, especially after the collapse of TerraUSD and its sister coin, Luna, earlier this month. Many proponents support greater oversight, in part because it could help cryptos gain credibility with the general public. There are currently around 300 million crypto users, and Sotiriou says that number is doubling every year, nearly double the historical rate of internet adoption.

“Even though the sentiment is very, very negative right now and everything looks dire,” he says, “the actual fundamentals of crypto haven’t changed.”

Davos Expedition

Here’s Julia Horowitz, senior editor of Before the Bell, with a dispatch from Davos, Switzerland, where she’s reporting on the World Economic Forum.

Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, has a message for tech giants SAP and Cloudflare: get out of Russia, now.

I spoke to Fedorov on the sidelines of the Davos summit – the first place he has visited outside Ukraine since the Russian invasion three months ago. He was here on a mission to urge business leaders and governments to do more to help, and met with executives from Google, Microsoft and Facebook’s Meta.

“Each of us can do even better,” he said.

Nearly 500 tech companies have left Russia since President Vladimir Putin sent troops to Ukraine on February 24, according to Fedorov’s tally. But he called out tech firms Cloudflare and SAP for continuing to operate in Russia, which he said undermined the effectiveness of the “digital blockade”.

“When a company works in the Russian market, it injects funds into the Russian budget from which the money goes to the Russian military,” Fedorov said. “It makes it possible to kill Ukrainians.”

Germany’s SAP, which makes enterprise software, said in April it planned to leave Russia. But Fedorov said the company was slowing down its departure and needed to move faster.

“I am convinced that they will eventually leave Russia, sooner or later – but sooner [is better] later, because people are getting killed,” he said. SAP said in a statement that it had “an ongoing dialogue with the Ukrainian government, which included conversations in Davos,” and that it “has stood in solidarity with Ukrainians since the beginning of Russia’s unjustified war.”

Cloudflare, meanwhile, said it is still operating in Russia to protect the flow of uncensored information to Russians.

“They say they would be there to defend some kind of democracy,” Fedorov said.

In a statement, the cloud services operator said it “has minimal sales and business activity in Russia” and that it “has terminated all customers we have identified as linked to sanctioned entities.”

Fedorov pointed out that a “digital blockade” is an important tool to fight back against Russia, as it can set the country back “two or three decades”, encouraging engineers and other specialists to leave.

“We also want people in Russia to understand, ‘Guys, something is wrong.’ And they must stand up against the war,” Fedorov added.

Chinese leaders signal panic

In an unusual move, China’s cabinet called an emergency meeting on Wednesday with more than 100,000 attendees, according to state media. The agenda: Do whatever it takes to save the economy.

During the unexpected video conference call, Premier Li Keqiang offered what is perhaps the gloomiest assessment yet of the state of the economy by Chinese leaders. Li said that in some ways he was in worse shape than he was in 2020, when the coronavirus first broke out, writes my CNN Business colleague Jessie Yeung. He urged leaders across the country to reverse rising unemployment.

Take a step back: The world’s second-largest economy, which once regularly posted growth rates of 10% or more, has suffered from its own Covid-19 protocol, which keeps millions of people in check.

Earlier this week, UBS lowered its full-year GDP growth forecast to 3%. China said it expects growth of around 5.5% this year.

Sustained growth is not just an economic priority. China’s party leadership has maintained its grip on power in part through growth that has lifted tens of millions out of poverty. Leaders are particularly sensitive to signs of social unrest that could result from a diminished economic outlook.

Earlier this month, Li, the second Communist Party figure after President Xi Jinping, described the country’s economic conditions as “complex and serious”. Despite the difficulties, President Xi has only doubled down on the zero Covid policy, saying the state will punish anyone who questions it.

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