Q9 Markets | Venturing Out
10 June 2022
Q9 Capital: www.q9capital.com
- Chainlink, Cardano prices soar on major upgrades
- Ethereum testnet completes merge
- Down-rounds ahead for crypto private equity
Bitcoin held steady at $30k as the ECB moves to raise interest rates for the first time in a decade and reclaimed its place in the top #10 most valuable global assets, overtaking Facebook (Meta Platforms) by market cap. Most other cryptocurrencies were flat with Chainlink (+28.4%) and Cardano (+7.7%) the notable exceptions.
Source: Companies Market Cap
The marginal gains came even as traditional markets struggled, with investor fears rising over ongoing efforts by central banks globally to tighten monetary policy to contain soaring inflation — the ECB cemented a July lift-off for its interest rate rising programme. Weakness in equities, rising bond yields, and a stronger dollar have taken some steam out of crypto markets.
The Solana Blockchain struggled with another significant outage earlier this week — the fifth of 2022. The four-hour outage on the Solana network led to a drop of an 2.2% dip in SOL this week. This also forced a rollback and restart by Solana’s validators as they did not process new blocks for hours, causing a complete shutdown of all its applications. SOL has plunged by over 20% in the past 30 days.
The price of LINK, the token underpinning the decentralised oracle network Chainlink, has soared to $9.28 (+28.8%) as it rolled out its Economics 2.0 roadmap.
Passive income opportunities are one of the biggest draws in the cryptocurrency ecosystem because it gives investors an easy opportunity to grow their portfolio size regardless of the day-to-day price action. The ability to stake LINK has been a sought-after capability for several years as Chainlink has consistently been the largest oracle project in the entire cryptocurrency ecosystem.
According to the announcement released by Chainlink, the overarching goal of staking on the network “is to give ecosystem participants, including node operators and community members, the ability to increase the security guarantees and user assurances of oracle services by backing them with staked LINK tokens.
Chainlink is a critical component of the crypto ecosystem and provides important off-chain information needed for the proper functioning of smart contracts. Effectively it is the eyes and ears for the underlying blockchains and brings real world data and information onto the chain so smart contracts can function.
Planned Roadmap for LINK Staking
Solving Diminishing Returns for Oracle Network Security
On the Verge of a Merge
The Ethereum blockchain’s first dress rehearsal for its upcoming Merge was successfully completed on Wednesday. The Merge is a long-awaited milestone in Ethereum’s journey toward a new proof-of-stake (PoS) consensus mechanism.
The complexity of making large changes to Ethereum’s code requires multiple tests on various testnets. This is the first test mege of its kind, and its outcome will help to inform developers’ future steps as they proceed toward the real Merge on mainnet.
The merge (upgrade to ETH 2.0) is scheduled to take place sometime this summer.
Digital asset financial services firm BlockFi is in the process of closing a massive down-round according to sources. It is currently raising at a $1bn valuation having been raising funds at a valuation above $5bn last year — a decrease of 80%.
The new round will allegedly be led by venture investment firm Bain Capital Ventures with participation from DST and Valar.
BlockFi’s down round represents a striking development in the industry for crypto services given the high degree of venture capital activity only months before and eye-watering valuations printed across the sector last year.
The lower valuation points to the more challenging atmosphere in the crypto industry at present as well as regulatory uncertainty surrounding firms such as BlockFi, which offers high-interest payouts against crypto holdings.
Crypto private equity valuations are facing a reckoning… and this (despite the FUD) is great news for many VC firms with long term horizons looking to acquire great firms at great prices.
VC firms deployed $28.9bn into crypto companies and projects in 2021 and $14.6bn in the first quarter of 2022 — often at nosebleed valuations as private equity firms bought into the rally on the promise of never ending growth and adoption. The number of VC cryptocurrency investments is now being scaled back, mirroring trends in other VC sectors across the globe. Investment in crypto was 7% of all venture capital investment globally last year.
If the crypto industry matches other sectors, the level of investment could slide as much as 50% by year end.
Some crypto VCs may now likely prioritize investing in and protecting existing holdings over deploying further dry powder into new startups. ‘Tourist capital’ will also exit stage left as both token and equity investments become more challenging during crypto bear markets.
However, for many VCs it’s created a perfect environment to buy. Valuations have come in and great companies are now available at a more reasonable price. The market was previously founder-friendly but is now becoming investor-friendly, with the reset causing increasingly wide spreads between founders’ asks and investors’ bids.
Generally, there is a big difference between people who are at the surface of understanding this space (those funds might take a backseat) but true crypto-native funds with conviction will continue to invest heavily.
A16z just raised an enormous $4.5bn crypto fund to invest in bargains, likening the long-term opportunity in crypto to “the next major computing cycle,” after PCs in the 1980s, the internet in the 1990s and mobile computing in the early 2000s. Many other VCs are following by launching new funds to buy great firms at great prices.
It’s the same story for crypto coins and tokens — there are a lot of bargains out there and this is a great opportunity to get in at a great price.
This week Q9 has ventured out to the Lone Star State for Consensus 2022 in Austin — a showcase and celebration of all that crypto has to offer. The event is igniting hard-hitting conversations and sparking critical debates on how these technologies are reshaping the world… and unlike previous crypto downturns (ie 2018) the mood is incredibly positive with builders and investors both in attendance looking to create value for the long term.
James and James venturing out to Consensus 2022
In the News…
- PWC: Global Crypto Hedge Fund Report
- US charges OpenSea ex-employee in first NFT insider trading case
- US regulators investigating Binance’s BNB token
- GS survey shows insurers are warming to crypto investing
- Jack Ma’s Ant Group launches digital bank in Singapore
- Sanctions take toll on laundering tools used by ransomware gangs
- Russia’s Rostec built “SWIFT alternative” for blockchain cross border payments
- Soros Fund Management CEO is more bullish on Ethereum than Bitcoin
- Citadel Securities, Virtu Financial building crypto trading platform
- $6mn bounty paid to white hat hacker likely averts sizable DeFi hack
- Unleashing the power of IoT while securing the network
- HSBC, SocGen, IBM backed blockchain company We.Trade starts insolvency procedure
- Solana commits $100mn to support S.Korean crypto projects
- BTC and ETH fell -1.2% & -2.4% respectively on the week (8am). The total market cap of the crypto market crossed $1.2tln mark and Bitcoin dominance continued to hover above 46%.
- Among other majors SOL dropped -2.4% while LINK & ADA rallied +28.8% & 7.7% week on week
- Seven day realised volatility(annualized) in BTC was unchanged but continued to shrink for ETH to 28%
- Oil futures rallied +3.8% while US Equities (SPX) retraced -2.2% week on week
- The US Dollar index gained +1.5% week on week
- 10 year US treasury yields rose 13bps and the Gold & Silver index dropped -4.8% this week
- Client activity skewed towards selling (2.4x sellers vs buyers) during last week
- Flow dominated by sellers in BTC & ETH
- Buying activity in ADA, SOL & YFI