By: Gregory Bilecki
This week we cover much-awaited CPI index data, Russia/Ukraine tensions and effects on crypto markets, EU turmoil and more crypto bans, with blockchain providing new uses cases for tracking down criminals. More growing pains for Binance, what increased volatility means for fintech M&A in 2022. Silicon Valley execs are leaving for Web3, Crypto is headed to Uber, and a shakeout looming for smaller, for-profit mining groups.
Fed News & Crypto Market Impacts
In what was seemingly a huge domino effect of events this week, US inflation data this past Thursday was released which reported the final figure for January at 7.5%. Crypto, not being pegged to U.S. inflation was largely affected by tensions between Russia and Ukraine growing more volatile in the region over the course of the week with Friday seeing an overall dip in BTC of about 5%, erasing roughly half of the prior weeks gains. This comes on the heels of a “imminent” attack reportedly planned upon the US Embassy in Kyiv. The Dow was also down 500 points headed into the weekend in response to this news, with major liquidity largely flowing to gold and gold shares, with gold reaching a 3-month high of $1,860.
If additional political unrest wasn’t enough, the chief of Hungary’s central bank, György Matolcsy, went on record as well this week in support of efforts from within the EU calling for the ban on crypto mining & trading due to the chance end-users may use the related funds to engage in illegal acts such as money laundering and pyramid schemes. Conversely, the FBI along with the DOJ successfully tracked down a money laundering operation using blockchain resulting in the arrest last Tuesday morning of Ilya Lichtenstein and his wife, Heather Morgan, both of Manhattan, both who were charged for laundering about $4.5b worth of Bitcoin using funds stolen from Bitfinex in 2016, with roughly $3.6 billion in the token having since been recovered.
In response to increased global regulatory pressure, Binance (also currently ranked as the world’s leading digital asset exchange), announced effective immediately that it will be scaling back future offerings, offering more tokens linked to equities, but more importantly increase security measures tied to user registrations.
In more Binance news, the company announced this week it’s planning a $200 million stake in Forbes. The media company which has operated historically in a largely similar format through now, announced its plans to go public last year along with SPAC Magnum Opus Acquisition Limited. This places the 100-plus year old media company in a much better position report on all of the various aspects of the digital asset space.
Figures released by accounting firm PriceWaterhouseCoopers this past week showed a 5000% increase in fintech related merger and acquisition activity in 2022 versus 2021, with a total USD value of approximately $55 billion. The US led the way in fintech M&A deals owning 51% of all transaction activity last year.
Contrary to our column last week, metaverse deals are still happening. InfiniteWorld announced Monday plans for its IPO via a reverse merger with SPAC, Aries I Acquisition. Scope of the new company’s operations involve creation of infrastructure involving asset creation, gamification, and distribution for Web3.
Cross-exchange digital asset trading platform Apifiny Asset Network entered into an agreement to merge with Abri SPAC I, at an initial valuation price of $530 million. Apifiny plans to bring its trading platform to institutional investors worldwide creating a seamless global marketplace for digital assets. The merger is expected to closed sometime in Q3 2022.
With fintech related M&A activity projected to expand even further into 2022, currently the regulatory approval process is progressing through the first part of the new year a bit slower than expected. Conditions seeming to blame for the delayed merger approvals are related to recent volatility in tech sector stocks leading to mis-priced valuations in some cases almost a year later after the acquisitions were first announced.
Web3 and the Exodus of Silicon Valley
As Web3 proves itself to be more than just a trending buzzword now, the advent of the new digital landscape that now exists on blockchain seems to be fostering an exodus of employees from traditional tech companies like Google, Meta, Twitter and head for crypto and DeFi startup territory. For leading execs leaving this arena, this is seen similar to the “dot-com” era of the late 90’s, as this new version of internet and a new way of consuming media emerges. Coinbase recently hired figureheads from LinkedIn, Google, and Lyft, and Polygon Studios acquired big names from YouTube. Tech recruiters aware of this trend seem to be in universal agreement that when the execs are seen leaving en-masse, other supporting talent will soon follow. Opponents of the “Web3 era” are keeping it simple: they say that this is mostly hype, and Web3 tech isn’t as versatile as we think it is. Time will soon tell as focus continues to increase upon this new industry.
Uber continues its downward trend after announcing Q4 earnings last Wednesday, underperforming the S&P 500 by an additional 10% margin as the ride sharing company faces ongoing driver shortages who left the platform during the height of the pandemic, with shares noted to halt trading during its investor day presentation last week. In response, Uber plans to update their software to ensure workers signing up for both its ride-hail and food delivery services, offers, allowing for both improved driver dispatching and higher utilization of each worker. The company also stated their “absolute” plans to adopt crypto in future mentioning Bitcoin and Ethereum as likely suitors of forms of payment.
This week Amazon hit FTC approval roadblocks in its $8.5 billion quest to acquire MGM Studios, the combined content catalog of Amazon and MGM would effectively surpass that of Netflix, citing antitrust concerns. Shares were down about 3% over the past week.
Crypto analytics firm Glassnode recently released a key metric which reported a negative trailing 30-day change in Bitcoin miner balances seeing net positions go negative for the first time since last year. Current assumption is smaller mining operations that remain cash-centric may be “quietly” selling off mined stockpiles in effort of acquiring more powerful mining equipment. Shares of more larger, more-resilient mining operations unaffected by the sell-off Marathon Digital Holdings Inc., and Riot Blockchain are up approximately 40% from January lows.
Gregory Bilecki is a freelance editor at Digital Wealth News, as well as full-time finance, digital marketing, and sushi aficionado. Follow him on Twitter and Instagram at @omgreaktmedia.