CRYPTO ROUNDUP: OPPORTUNITIES AMIDST CHANGING TIDES 

Pace of Crypto Venture Capitalist Deals Slows in Q1

Q1 2023 saw a chill in venture capital investments as the effects of the crypto winter seeped into investor behaviour. Pitchbook reports that global deal value stood at $2.6B, marking an 11% dip from the preceding quarter, and a staggering 78% slump year-over-year.

Despite a total of 353 deals, Layer-2 scaling solutions were in the limelight. Blockstream, a Bitcoin scaling solution, secured an additional $125MM after a successful $163.1MM Series B round in 2022. Zero knowledge-based companies, such as Scroll, which is developing a zero-knowledge Ethereum Virtual Machine solution (zkEVM), raised $50MM.

While early-stage firms faced a tough market with funding rounds down 16.7%, late-stage valuations soared by 209%. Ledger and Taurus, key players in the wallet hardware and technology domain, raised $108MM and $65MM in their Series C and Series B rounds, respectively.

Despite these figures, the first quarter’s deal flow is likely a hangover from the previous year’s bear market. As the crypto markets revive in 2023, the dealmaking atmosphere seems to be warming up. This week alone witnessed Worldcoin nearing a $100MM funding round, and River, a Bitcoin financial services firm, securing a $35MM B round. Binance Labs, boasting over 200 portfolio companies, is deploying $500MM, elevating its assets to $9B.

US Struggles to Match Global Regulatory Developments

The E.U. has finalised its comprehensive crypto regulatory framework, MiCA, for its twenty-seven member states. However, the U.S. is lagging behind in reaching a consensus on its regulatory approach. The U.S. House of Representatives recently introduced a collaborative approach, hoping to cut through the legislative deadlock.

The House Financial Services Committee’s Subcommittee on Digital Assets, Financial Technology, and Inclusion collaborated with the House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development for a joint hearing. While they recognised MiCA as an example of global advancements, disagreements arose over the need for new regulations.

Rep. Stephen Lynch (D-Mass) insisted existing laws adequately cover digital assets, aligning with the SEC’s stance. However, HFSC Chair Patrick McHenry (R-NC) and Rep. Maxine Waters (D-CA) disagreed, with McHenry urging the SEC to clarify registration protocols for crypto platforms.

While additional hearings are on the horizon, states are bridging regulatory gaps. New York, Florida, California, Texas, New Jersey, and Illinois are all taking steps toward crafting comprehensive regulatory frameworks which should help provide clarity for the industry moving forward.

China Fuels Blockchain Education Despite Crypto Ban

Despite its crypto ban, China is empowering Hong Kong to move ahead with crypto licensing and is backing blockchain education. With the establishment of the National Blockchain Technology Innovation Centre earlier this month, the Chinese government is demonstrating its commitment to the digital economy.

Despite a stringent stance on cryptocurrencies, China’s commitment to digital innovation is undeterred. The nation’s endorsement of crypto licensing in Hong Kong and the recent launch of the National Blockchain Technology Innovation Centre illustrates China’s strategic move towards fostering a robust digital economy.

This centre, set to impart blockchain knowledge to over half a million specialists, marks a significant collaboration between think tanks, educational institutions, and blockchain enterprises. Spearheading this drive is the Beijing Academy of Blockchain and Edge Computing, the creators of the ChainMaker blockchain. With assistance from fifty corporations, the majority being state-owned, the initiative aims to integrate disparate “blockchain islands” into a unified national blockchain. This consolidated system is expected to fortify key sectors of China’s economy, including cross-border trade, supply chain finance, energy, production safety, and the food industry.

China isn’t the only nation investing in blockchain education. Initiatives like Abu Dhabi University’s partnership with 5ire, Kenya’s collaboration with Venom Foundation, and Cyberchain’s commitment to educating Nigerians signify a global trend towards democratizing blockchain knowledge. Interestingly, a considerable number of parents and college graduates in the United States who comprehend blockchain express a desire for crypto courses to be introduced in schools.

Quickfire Roundup: Regulation, Security, and Crypto Business

• The U.S. Dept. of Justice escalates its efforts in money laundering enforcement.
• Ukrainian law enforcement receives training from the U.S. IRS to track Russian Crypto Assets.
• Binance withdraws from Canada in response to new regulatory measures.
• PayPal’s cryptocurrency assets approach the $1B mark.
• LG Electronics pursues a patent for a TV capable of trading NFTs.
• Three new Ethereum ETFs await approval.

Decentralised Finance and the World of Web3

• Reef Labs earmarks $10MM to stimulate Middle East Web3 projects.
• Odsy, a decentralized wallet manufacturer, secures $7.5 MM in funding.
• Blocktorch, a Web3 tooling firm, raises $4.2MM in a seed round.

Taking the Crypto Pulse: Midweek Market Update

At the time of writing, the total crypto market capitalisation stands at US$1,139,066,447,478.

Bitcoin (BTC, -0.65%) and Ethereum (ETH, -0.83%) experienced a drop to two-month lows over the weekend but demonstrated resilience with a subsequent rebound. Glassnode reports that Bitcoin addresses with at least one BTC exceeded the one million mark. Notably, from February 2022 to the present week, approximately 190,000 new “whole coiners” have emerged. We wrote at length about this topic on Tuesday here.

Bitcoin Cash (BCH, +1.98%) saw a decrease in price to start the week, then rebounded strongly as the network announced a significant upgrade allowing for the issuance of “CashTokens”. These tokens, which can represent physical assets or serve as currencies, commodities, securities, and more, could alleviate network congestion caused by Ordinals and meme coins, which have led to record-high transaction fees.

Litecoin (LTC, +15.83%) made significant strides this week, bypassing Polkadot (DOT, +1.71%) briefly to record a double-digit gain. Lower fees and faster transactions on the Litecoin network could be attracting investors.

Chainlink (LINK, +2.58%) had an impressive week due to the increased integration of its price feeds across multiple DeFi projects. Additionally, a tweet from Chainlink’s official Twitter account hinted at an upcoming major upgrade.

As we move further into 2023, the crypto market continues to show its characteristic volatility, proving once again the importance of informed decision-making for investors. As governments around the globe continue to adjust their approaches to the regulation and integration of digital assets into their financial ecosystems, the future of cryptocurrency remains both exciting and unpredictable.

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