Olivia Strobl

Crypto Market Musings

Back in December, I dug into the concept of “effective altruism,” or the goal of making as much money as possible to maximize philanthropic impact. Sam Bankman-Fried (SBF), founder of fallen crypto exchange FTX, was one of its biggest proponents. Ironically, in the mess following the collapse of his exchange, SBF is now asking for his money back.

According to The New York Times, SBF and other FTX executives donated more than $90 million to political campaigns. SBF won the silver medal as the Democrats’ second-largest donor ahead of the midterms last year. But his donations also reached across the aisle. In a YouTube interview with Tiffany Fong, SBF claimed to have used “dark money” to come in as the third-largest donor to the Republican Party, also ahead of the 2022 midterms. For some time he kept this under wraps to avoid media criticism (which is also incredibly ironic).

Politicians who received donations from FTX were first faced with return requests in December. If the politicians don’t return the money by February 28, they risk facing bankruptcy court and added interest. Safe to say SBF’s altruism was less than effective.

What Olivia Is Thinking About

Sticking with the theme of politics and government, I want to take you across the Atlantic to Norway. The country’s government just announced a cap table management platform called BRØK that will be powered by Arbitrum, an Ethereum-based second-layer platform. BRØK will allow for faster and more secure shareholder management of unlisted companies.

Though the program is only in the testing stage, it represents a huge leap forward in blockchain applications. As a refresher, a blockchain is a distributed ledger that stores data across a network of computers. As such, blockchain has two huge advantages over traditional databases: transparency and immutability. Thanks to blockchain explorers, anyone can trace transactions in real time. Transactions are also permanent once they are recorded on the blockchain. 

Applying blockchain technology to shareholder data will make for transparent ownership information and quicker, safer transfers. Here’s how it works: Company stock is represented as ERC1400. ERC1400 allows for the tokenization of financial assets on the Ethereum blockchain and is already supporting a number of other projects. 

I have remained bullish on ethereum throughout this bear run because of its smart contract functionality. Applications like this only make me more excited for the future of blockchain tech. Democratizing ownership of private companies is a mission I have worked on for four years at KingsCrowd. I am excited to watch BRØK develop as an ethereum bull, champion of democratized private investing, and shareholder of several private companies. I applaud Norway for being a first mover in this application and hope to see the project succeed and ultimately expand to other nations. 

For a deep dive into Norway’s new shareholder management system, I strongly encourage you to check out this article by Jon Ramvi, CEO and founder of Blockchangers. 

And Finally…

Speaking of expanding blockchain applications, innovation is coming in the most unlikely of places: the Department of Motor Vehicles (DMV). The California DMV is attempting to become more efficient by introducing car titles on the Tezos blockchain. A proof of concept was conducted in late January in partnership with software firm Oxhead Alpha.

Unfortunately for California residents like myself, the DMV will still have oversight — and we likely won’t be avoiding it entirely anytime soon.

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Norway Leads the Way in Blockchain-Driven Cap Table Management Tech Republished from Source https://earlyinvesting.com/norway-leads-way-blockchain-driven-cap-table-management-tech/ via https://earlyinvesting.com/feed/

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Crypto Market Musings

Despite recent regulatory slip-ups, Coinbase looks like the youngest sibling of the crypto exchange family that can do no wrong. In case you missed it, last week Coinbase reached a $100 million settlement over violations related to anti-money laundering legislation. In short, Coinbase allowed customers to open up accounts without sufficiently checking into backgrounds and had reportedly done very little by way of looking into existing suspicious customers that could be using the platform for illegal activities. The New York State Department of Financial Services fined the exchange $50 million and is requiring another $50 million to go toward beefing up the current compliance system. After the settlement was announced on Wednesday, Coinbase’s stock (NASDAQ: COIN) rose 12.2%, closing at $37.70. Bad news for drug traffickers, but good news for COIN holders. As of this writing, the stock is at $42.92 — still up from Wednesday.

What Olivia Is Thinking About

I want to take a step back this week from current events in cryptocurrencies and exchanges. (I hope this is a welcome reprieve from being bombarded with SBF memes.) Instead, I want to break down some 2023 predictions for the world of venture and how exactly the venture climate will impact crypto amid the pending recession. 

According to a report by Galaxy Research, venture capital firms invested $31 billion in crypto companies in 2021. 2022 nearly matched 2021’s record highs with $30 billion. But unsurprisingly, venture dollars flowing into crypto companies plummeted on a quarterly basis throughout last year — so much so that the fourth quarter of 2018 saw more capital than the fourth quarter of 2022. 

Many factors contributed to this decline in venture funding — most obviously soaring inflation rates, economic instability, and weak investor confidence in the space following the spectacular collapse of FTX. And crypto does not exist in a vacuum. Just a few weeks ago, I explained how the fall of FTX had a domino effect on artificial intelligence companies. And if you look at bitcoin prices compared to dollars invested in crypto startups, it’s impossible to miss the correlation. The declining value of the crypto market has undoubtedly made it harder for entrepreneurs to innovate in the space. 

Declining venture dollars fuel one of many predictions for crypto in 2023. It’s clear that crypto venture investments will likely continue to decline as we move into the new year, but this might not be all bad news. Crypto and fintech, many argue, were overfunded sectors in 2022. This decline should be considered a rationalization that will force entrepreneurs to up their game while also weeding out superfluous or illegitimate projects. As Mahesh Vellanki for Cointelegraph explains, “new settlement (layer 1s/2s), interoperability (layer 0/bridge), lending and trading protocols will continue to get funded to fill the vacuum resulting from the changes resulting from the recent hacks, treasury shortfalls, regulatory changes and exchange collapses.” In my opinion, this may be just what the industry needs to start the new year off on the right track. 

And Finally…

The official Game of Thrones NFT collection launched this week and sold out on the Nifty’s marketplace in just seven hours. Despite the demand, many have flocked to Twitter to mock the art, which is… interesting, to say the least. Similar to the season 8 finale, the NFT collection left fans feeling underwhelmed. You can see for yourself here.

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2023 Likely to Bring a Crypto Investment Correction for VCs Republished from Source https://earlyinvesting.com/2023-likely-bring-crypto-investment-correction-vcs/ via https://earlyinvesting.com/feed/

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Crypto Market Musings

Over the past week, bitcoin and ethereum have begun to stabilize following the spectacular collapse of FTX and the fall of crypto tycoon Sam Bankman-Fried (SBF). BTC prices have hovered around $17,000, and ETH prices have hovered around $1,300. According to CoinDesk, volatility for the two coins has also fallen dramatically, down 47% for bitcoin and 45% for ethereum. This decrease in volatility paired with neutral momentum has led to relatively stable prices. And after the mess that the market has seen this past month, I’ll take some stability. 

Some more good(ish) news: Minutes released from November Fed meetings stated “a substantial majority of participants judged that a slowing in the pace of [interest rate] increase would likely soon be appropriate.” Forbes makes it clear that this is not an indication that rates will be cut, but rather the pace of the increases would likely slow. The next meeting on December 14 has many predicting a 50-basis-point hike. Fifty basis points may be a welcome reprieve from the 75-point hikes we have now seen four times over, but it’s by no means a signal that the economy has cooled completely. The jobs report for November came out hot in spite of the aggressive efforts to cool the economy. In short, we aren’t out of the storm yet. Should the next hike be 50 basis points, I suspect crypto will react with some moderate spikes before restabilizing. 

What Olivia Is Thinking About

What do crypto, artificial intelligence (AI) and Santa have in common? If you said skeptics and nonbelievers, you are technically right. As of the FTX collapse, however, crypto and AI have a lot more in common than they used to. 

SBF, a name that you are probably sick of hearing by now, was heavily involved in a movement called “effective altruism.” The now fallen founder of bankrupt crypto exchange FTX ironically adhered to the idea that he had to make as much money as possible to maximize his philanthropic impact. Many effective altruists, like SBF, are concerned with what The New York Times labeled “catastrophic risks, such as pandemics, bioweapons and nuclear war” — or in this case, takeover and destruction of humanity by AI.

I studied machine learning for years and spent time at an AI-focused venture fund prior to joining KingsCrowd. I have read many expert blogs on the subject of why we should (or should not) fear intelligent technology. My opinion on a potential AI takeover can be summarized as follows: AI singularity is unlikely, though not out of the question. But should it occur, it likely won’t be in our lifetime. 

Many of my fears are rooted not in the technology itself, but in those who control the technology. Think back to the early 2000s when “computerphobia” was rampant, and we all thought that computers would replace much of the workforce. To some extent, this is true, but this technological wave probably created more jobs than it destroyed.

SBF, on the other hand, was particularly afraid of our future AI overlords. The New York Times states… 

“…the 30-year-old entrepreneur and his FTX colleagues funneled more than $530 million — through either grants or investments — into more than 70 AI-related companies, academic labs, think tanks, independent projects and individual researchers to address concerns over the technology.” 

With the collapse of FTX, many of these fund recipients are in limbo when it comes to funding. And that’s not to mention potential reputational backlash. The fallout from the FTX collapse continues to have more far-reaching effects than many could have imagined.

And Finally…

The U.S. has officially been knocked out of the World Cup by The Netherlands, but if you’re a soccer (and NFT) fan, there’s still much to be excited about. Argentinian football legend Lionel Messi just came out with an NFT collection on Ethernity. The Time Machine collection sale ends today. So if you’re interested, check out a buying guide here.

Messi is not the first soccer star to come out with an NFT collection. Cristiano Ronaldo’s collection in partnership with Binance went live in November.

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SBF and the Fear of Future AI Overlords Republished from Source https://earlyinvesting.com/sbf-fear-future-ai-overlords/ via https://earlyinvesting.com/feed/

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Crypto Market Musings

In case you missed it, Elon Musk is officially “Chief Twit.” The business magnate became the sole director of Twitter after his deal to buy the company (finally) went through on October 27. Musk went on to use the platform to spread baseless conspiracy theories (now deleted) after dissolving Twitter’s entire board. Character flaws aside, Musk’s spotlight undoubtedly prompted movement in the crypto sphere. 

On Saturday, Dogecoin (DOGE) was up more than 70% following the announcement that Musk’s deal to purchase Twitter had gone through. According to CoinDesk, Dogecoin ​​futures brought in more than $89 million in liquidations since October 28, one day after Musk completed the purchase. 

Musk has long supported DOGE. DOGE was initially created as a joke. Back in 2020, Musk sent DOGE up 20% with a tweet that read “One Word: Doge.” 

The meme coin has now reached a market capitalization greater than $10 billion, a stat that Dogecoin co-founder Jackson Palmer likely never imagined. But you probably won’t find Palmer thanking Musk for anything. Palmer is a Musk critic. He called Musk a “self-absorbed grifter” back in 2021 after the Tesla CEO decided to stop accepting bitcoin as a payment method for electric cars. Palmer, an arguably more magnanimous figure, donated all of his DOGE to charity when he left the project.

What Olivia Is Thinking About

In my last crypto newsletter on Early Investing, I explained why some crypto events cannot be “priced in” — just like events that often move the stock markets, such as the all-too-familiar interest rate hikes. (The Fed raised rates another 75 basis points on Wednesday.) This week, I want to explore another assumption of bitcoin that challenges traditional economic theory.

For years, bitcoin was considered to be a hedge against inflation. Before diving into this assumption, let’s take a step back and break down inflation. Inflation refers to a decrease in purchasing power that directly results from increasing costs of goods and services. If an apple costs $1 today and $2 a year from now, the apple has stayed the same but the cost has gone up. Thus the dollar is worth less than it was when the apple cost $1. When the amount of money circulating in an economy (or money supply) outpaces the economic growth of said economy, inflation is sustained. 

One key feature of bitcoin is that, unlike the dollar, the circulating supply is capped. There are 21 million bitcoin total (around 19 million of which are mined and in circulation). And there will never be more than 21 million. Therefore, unlike fiat currency, a government cannot just keep producing more bitcoin. If the supply cannot continually outpace the growth, bitcoin is a hedge against inflation… right?

Well, not exactly. Year-over-year inflation stood at 8.4% as of September. Bitcoin fell below $18,500 in September, down from an all-time high of $68,789.63 in November 2021. Raising interest rates is one way the government can attempt to combat inflation. Last year when interest rates were much lower, riskier assets like crypto became more attractive. Once interest rates went up, demand for alternative, more volatile assets declined along with the price of bitcoin.  

Bitcoin plummeting with the rise in inflation negated the predicted effects of a scarcity mindset while reminding us that overall investor confidence can move markets. After all, being decentralized does not mean existing in a vacuum immune to macroeconomic sentiments. Just like with “pricing in” market events, bitcoin failing as an inflation hedge says more about human psychology than it does about economic theory.

And Finally…

Binance Coin (BNB) is considered a “deflationary” currency, meaning that supply is limited — in this case, to 100 million BNB. Each quarter, Binance actually destroys BNB supply as it nears that 100 million mark. Inflationary currencies, on the other hand, have an unlimited supply. Any guess as to a crypto classified as inflationary? (Hint: I talked about one earlier in this newsletter.)

If you guessed Dogecoin, you would be correct. Palmer actually abolished the cap on DOGE back in 2014. Now, the circulating amount of DOGE is unlimited. 

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Bitcoin Challenges Traditional Economic Theory Republished from Source https://earlyinvesting.com/bitcoin-challenges-traditional-economic-theory/ via https://earlyinvesting.com/feed/

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Crypto Market Musings

The long-awaited Ethereum Merge occurred September 15th at around 3 AM ET. As of this writing, ethereum is down around 8% following the Merge. The Ethereum blockchain has now moved from a proof of work consensus mechanism to proof of stake. Let’s break down what this means.

In order for the blockchain to work, a large number of computers need to verify transactions. Proof of work —  the first ever blockchain legitimizing approach — relies on “miners” to solve various complex, asymmetrical math problems to validate a “block.” Once verified, a block can be attached to a chain of blocks that have also been verified, hence “blockchain.” A crypto reward incentivizes miners to solve these problems and add to the blockchain.

Proof of stake has the same purpose as proof of work. This time, instead of miners, those verifying transactions are called “validators.” With proof of stake, there is no competing to solve a computational puzzle. Validators simply “stake,” or lock up, some of the currency. Once that currency is staked, users are eligible for a reward or the opportunity to create a block to add to the blockchain. If the validator creates a malicious block, the stake can be lost.

Why does this matter? Perhaps the biggest reason for the ETH Merge from proof of work to proof of stake is the amount of energy that will be saved. The mining process requires massive amounts of computational power. Take bitcoin, which still uses proof of work. One single bitcoin transaction needs more energy than what would be required to power three homes in the United States for an entire day. Talk about an upgrade.

What Olivia Is Thinking About

My father is an economist by trade. When I first started talking to him about cryptocurrency, he was skeptical at best. This was back in 2020, which happened to be a bitcoin halving year. I encouraged him to get in on BTC prior to the halving event in May, suggesting that it would likely spark a bitcoin bull run as it had in the past. (A bitcoin halving refers to the reduction in reward for bitcoin miners.) 

Bitcoin halvings, like the Ethereum Merge, are relatively predictable. There are expected dates for when these events will occur. In fact, there are dedicated countdown websites. I would have been remiss if I hadn’t mentioned this to my dad, who was considering investing just before a halving. His response: “If you know about the event, is it not priced in?”

He makes a fantastic point. Many of my conversations with him about crypto revolve around how crypto is and isn’t tied to other centralized markets. In some ways, crypto follows general economic principles. And in others, it doesn’t. Which brings me back to the question, if everyone knows when the next bitcoin halving will occur — or knew when the Ethereum Merge would happen — why do these events still move the markets? 

For one, pricing is an art, not a science. In theory, everything should be “priced in.” We expected several times this summer for the Fed to hike up the interest rate by 75 basis points — yet when it did, the markets still moved. Additionally, there are a number of micro and macro market actors that are not, as much as we would probably like them to, going to act in concert. It is impossible to look at any one event in isolation. 

And finally, humans are illogical. For example, despite it being widely known that bitcoin supply is limited, halvings still remind us that bitcoin is scarce. In this sense, bitcoin follows the general economic principle of scarcity and demand. Prices go up if there is demand for a scarce resource. But the idea of scarcity for a digital asset is somewhat abstract. And as illogical humans, it can be easy to forget. So the reminder that bitcoin is limited spurs market action that seems obvious in retrospect.

It will be interesting to see how the Ethereum Merge impacts ETH’s price in the short and long term. In theory, the Merge should’ve been priced in. The mid-September date was anticipated for some time, despite there being a few delays. The futures market — which is more keen on pricing strategy — has ETH spiking post Merge only to plummet in October. Only time will tell. 

And Finally…

September means that it is officially pumpkin spice season. And as Starbucks prepares to cater to East Coast, millennial, Ugg boot owners, it is also preparing to hop on the NFT train. The coffee enterprise will be introducing an NFT rewards program on the Polygon network. The program, named Starbucks Odyssey, lets users collect NFT stamps that offer rewards. I joined the waitlist yesterday.

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Why Some Market Events Aren’t “Priced In” Republished from Source https://earlyinvesting.com/why-some-market-events-arent-priced-in/ via https://earlyinvesting.com/feed/

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