Bitcoin BTC Price Not Ready to Rise as Investors Await Fed Chair Speech, More Earnings

Crypto trades flat as investors await Powell speech, more earnings

Major digital asset prices traded mixed over the weekend, with bitcoin down 1.7% and ether down 2.3% over the weekend.

After a mediocre start to the earnings season, investors are believed to be looking ahead to Federal Reserve Chairman Jerome Powell’s speech before the Economic Club in Washington, DC, scheduled for Tuesday afternoon, before making any big moves.

FactSet data shows that less than 1% of companies in the S&P 500 reported earnings that topped estimates. This is below the five-year average of 8.6%, and the 10-year average of 6.4%.

“As a result, the fourth quarter earnings decline is larger today compared to the end of last week and compared to the end of the quarter,” FactSet senior earnings analyst John Butters wrote in a market update on Friday. “If the index reports an actual decline in earnings for Q4 2022, it would mark the first year-over-year decline in earnings reported by the index since Q3 2020.”

Speaking late last week on CoinDesk TV, David Siemer, CEO of SEC-registered digital asset investment manager Wave Financial, said the market is giving mixed signals — strong jobs numbers but mediocre earnings results — and he still expects a recession this year , albeit a weak one.

“I’m a little bit more optimistic that it won’t be as severe a recession as in a great recession or great, great recession,” he said, pointing to consumer resilience. “The fact that the Fed’s actions are having such a slow effect doesn’t mean that they won’t cumulatively eventually have a big effect. We’re probably still a quarter or two away from seeing what the Fed’s actions have actually done to the economy.”

And what does this mean for crypto prices, looking ahead? Joe DiPasquale, CEO of crypto fund manager BiBull Capital, wrote in a note to CoinDesk that crypto markets are “optimistic” after a modest rate hike and bitcoin will “hover around the $20,000 support level in the coming months, barring other unforeseen events.” and market action.”

Meanwhile, the US Dollar Index (DXY) opens the Asia trading week at 103.12, staying in what many analysts call a “defensive” position. The measure of the world’s largest fiat asset spent most of last year rising, hitting stock and crypto prices hard. So far this year, it is down 1.4 percent.

Can Crypto VCs Avoid the Mistakes of Last Year?

The last quarter of 2021 was the end of an unprecedented bull market that began the previous year with covid-inclusive macroeconomic policies and ended with the Fed raising interest rates in 2022 and with a trio of collapses, notably the crypto exchange FTX and its trading arm Alameda Research. Venture capitalists enjoyed the ride on the way up, but certainly felt the pain on the way down in 2022 as sweeping failures knocked the wind out of their portfolios.

For the industry, the trillion-dollar question will be: Did VCs learn anything, and can they avoid repeating the mistakes of last year that severely dented their profits. VCs invested furiously as crypto prices soared, but their methods often seemed clumsy.

But despite these data points indicating that the crypto winter is thawing, VCs’ investment in digital assets and blockchain projects fell 90% in January, according to a recent CoinDesk report.

“Over the past 18 months, VC investment in crypto has peaked, with investments scattered across the ecosystem. Due diligence cycles were compressed to weeks and sometimes days during this time, with many investors being cut from the round if they asked crypto startups to follow.-up diligence questions (this is partly why FTX wasn’t really diligent),” Robert Le, a senior emerging technology analyst at Pitchbook, told CoinDesk in an email.

Le said that over the past six months, there has been a significant slowdown in the speed at which VCs make deals, with the due diligence cycle now taking months.

“The capital is now concentrated in areas with business models and product market adaptation. There is also less appetite for pure token rounds, with many investors preferring equity,” Le said.

Throughout the 2020-22 bull market cycle, many observers found it almost comical how many projects with dubious merit, teams with negligible skills, and projects that were not the right fit received a seemingly endless bucket of funding.

“Investors were very willing to underwrite risk, bet on exploration and niche products and have an optimistic view of the space,” Nate George, co-head of venture capital at Cumberland, told CoinDesk.

George said investors were tolerating poorly constructed legal documents with extremely limited investor protections, just to get into the sector. In turn, through the 2021-22 cycle, the funds used a “spreading approach” to investing with large pools of investors writing small checks demonstrating their low conviction in the project.

In fact, anyone who wanted it got funding.

“Startups were able to raise rounds of uncharacteristic size for their stage, often acquiring several years of runway pre-product, while over the past six months, investors have moved to underwrite fewer deals aimed at higher conviction, more concentrated plays ,” George told CoinDesk in a note. “During this period, investors began to re-evaluate their focus on what constitutes product-market fit, realizing that large token incentive programs that reward user participation create skewed traction metrics and overlook user stickiness.”

A lot must be going through investors’ minds at the moment. On the one hand, there is plenty of data – in the form of blood-red losses on earnings settlements – that show that a slower approach to high-conviction investing is better for both the industry and the fund’s returns.

Data from CryptoRank shows that smaller, more nimble funds deliver triple-digit returns.

And what do they invest in? Lesser known protocols. The things that climb fast and fall hard. Things that will be part of a “scattershot” portfolio.

This is not to say that the largest funds have not performed well in the past month.

Coinbase Ventures, which was very busy throughout 2022 with 121 closed deals, according to Pitchbook, has seen its token portfolio rise 56% in the past month. Andreessen Horowitz (a16z) is about the same. Animoca Brands, which was rumored to be suffering from serious financial strife at the end of last year, has had its fortunes turned around in a big way.

But which thesis wins?

The first US jobs report of the year revealed that nonfarm payrolls grew by 517,000 in January, while the unemployment rate was little changed at 3.4%. What does it mean for crypto? Wave Financial’s co-founder and CEO David Siemer joined the conversation. McMillan LLP partner Benjamin Bathgate, LevelField Financial CEO and Chairman Gene Grant II and Catawba Digital Economic Zone CEO Joseph McKinney also joined the “First Mover.”

UPDATE (Feb 6 15:25 UTC): Adds where Jerome Powell will speak Tuesday in the fourth paragraph.

CORRECTION (February 7, 00:12 UTC): Corrects the business description of Wave Financial, which is an SEC-registered digital asset investment manager.