A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking on the same link.
London
CNN Business
—
The ever-deepening divide between the crypto-evangelists and the naysayers has perhaps never been so stark.
On Wednesday, Andreessen Horowitz, Silicon Valley’s most prominent venture capital group, made a $4.5 billion bet on what it called a “golden era” for cryptocurrencies, citing “a massive wave of world-class talent” entering the the industry previously. year.
“That’s why we decided to go big,” wrote Chris Dixon, a managing partner at the firm.
On the same day, a former bullish investor made headlines predicting that bitcoin could fall to $8,000 from today’s levels of around $30,000.
“Bitcoin and any cryptocurrency at this point has not really established itself as a credible institutional investment,” Scott Minerd, Guggenheim Partners’ chief investment officer, told Bloomberg News at the World Economic Forum in Davos. “It’s really become the market for a bunch of yahoos and backwaters.”
That’s quite a shift since last February, when Minerd told CNN’s Julia Chatterly that he could see bitcoin, which at the time was trading around $40,000, eventually rise to as much as “$400,000 to $600,000.”
Bitcoin peaked at $69,000 in November. It has lost more than half its value since then, as investors have pulled out of riskier assets in the face of rising interest rates.
Despite the crash, there were several panels on cryptocurrencies and digital money at Davos this year, not to mention a bevy of crypto-related vendors along the city’s famous promenade. But establishment voices at the summit wasted no time in disparaging the web3 crowd.
“Bitcoin may be called a coin, but it is not money,” Kristalina Georgieva, managing director of the International Monetary Fund, said on day one of the event. “It’s not a stable store of value.”
So where do we go from here?
It’s easy to see crypto’s daily volatility, as well as fringe projects like Terra and Luna entering a “death spiral,” rejecting the blockchain technology and philosophy that underpins them. But crypto stalwarts say that despite the problems, crypto is not going away.
First, according to some experts, crypto must confront the branding problem.
The term cryptocurrency can be misleading, said Marcus Sotiriou, an analyst at digital asset brokerage GlobalBlock.
“Ninety-nine percent of cryptocurrencies aren’t trying to be currencies — they’re trying to be assets behind these blockchain networks,” he said. “And I think it’s only a matter of time before all businesses integrate blockchain in one way or another.”
Demands for closer regulation are increasing, especially after the collapse of TerraUSD and its sister coin Luna earlier this month. Many advocates support greater oversight, in part because it could help cryptos gain mainstream credibility. There are an estimated 300 million crypto users currently, and Sotiriou says that number is doubling every year – almost double the historical rate of internet adoption.
“Even though the sentiment is very, very negative at the moment and it all seems to be doom and gloom,” he says, “the actual fundamentals of crypto haven’t changed.”
Here is Julia Horowitz, lead author of Before the Bell, with a dispatch from Davos, Switzerland, where she is reporting on the World Economic Forum.
Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, has a message for tech giants SAP and Cloudflare: Get out of Russia, now.
I spoke to Fedorov on the sidelines of the Davos summit – the first place he has visited outside of Ukraine since Russia invaded three months ago. He was here on a mission to urge business and government leaders to do more to help, meeting with executives from Google, Microsoft and Facebook’s Meta.
“Each of us can make it even better,” he said.
Nearly 500 tech companies have left Russia since President Vladimir Putin sent troops into Ukraine on February 24, by Fedorov’s count. But he called out technology companies Cloudflare and SAP for continuing to operate in Russia, which he said undermines the effectiveness of the “digital blockade.”
“When a company works on the Russian market, it pumps funds into the Russian budget from which money goes to the Russian army,” Fedorov said. “This makes it possible to kill Ukrainians.”
Germany’s SAP, which makes business software, said in April it plans to exit Russia. But Fedorov said the company is slow to take off and needs to move faster.
“I am convinced that they will eventually leave Russia, sooner or later – but sooner [is better] than later, because people are being killed,” he said. SAP said in a statement that it has “an ongoing dialogue with the Ukrainian government, which included talks in Davos,” and that it “has stood in solidarity with the Ukrainians since the start of Russia’s unjustified war”.
Cloudflare, meanwhile, has said it continues to operate in Russia to protect the flow of uncensored information to Russians.
“They say they are supposedly there to defend some kind of democracy,” Fedorov said.
In a statement, the cloud service operator said it “has minimal sales and commercial activity in Russia” and has “terminated all customers we have identified as being linked to sanctioned entities”.
Fedorov stressed that a “digital blockade” is an important tool to fight back against Russia, as it could set the country back “two or three decades”, encouraging engineers and other specialists to leave.
“We also want people in Russia to understand that, ‘Guys, something is wrong.’ And they have to stand up against war,” Fedorov added.
In an unusual move, China’s cabinet called an emergency meeting with more than 100,000 participants on Wednesday, according to state media. The agenda: Do what it takes to save the economy.
During the unexpected video teleconference, Premier Li Keqiang gave what may be the grimmest assessment yet of the state of the economy from China’s leadership. Li said it is in some ways in worse shape than it was in 2020, during the first outbreak of the coronavirus, writes my CNN Business colleague Jessie Yeung. He urged leaders across the country to reverse rising unemployment.
Step back: The world’s second-largest economy, which once regularly boasted growth rates of 10% or more, has suffered under its own Covid-19 protocol, keeping millions of people under lockdown.
Earlier this week, UBS cut its full-year GDP growth forecast to 3%. China has said it expects growth of around 5.5% this year.
Sustainable growth is not just an economic priority. China’s party leadership has maintained its grip on power in part through technological growth that has lifted tens of millions of people out of poverty. Managers are particularly sensitive to signs of social unrest that may result from diminished economic prospects.
Earlier this month, Li, number two in the Communist Party after President Xi Jinping, described the country’s economic situation as “complex and serious”. Despite the difficulties, President Xi has only doubled down on the zero-Covid policy, saying the state would punish anyone who questions it.
