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2021: Year of Institutional Bitcoin Adoption as VC Crypto Funding Hits $25B

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2021: Year of Institutional Bitcoin Adoption as VC Crypto Funding Hits $25B

2021 might be the year when institutional bitcoin (BTC) adoption finally happened, with venture capital funding for crypto asset firms rising 720% year-on-year to $25.1 billion, according to data by The Block Research.

Throughout the year, several companies bought BTC, it says, including Jack Dorsey’s Square, which allocated nearly 5% of its assets to bitcoin. The idea is that as a reserve asset, BTC is a solid hedge against fiat inflation.

While Marathon Digital Holdings kick-started the institutional migration with an $150 million bitcoin purchase (rising to $181 million later) in January, it is Michael Saylor’s MicroStrategy Inc. that carried the torch of corporate adoption.

The U.S. technology firm went all out on bitcoin, and has spent a total of $3.66 billion on the digital asset to date. MicroStrategy now holds 122,477 BTC – the most of any publicly traded company – with a current market value of $5.91 billion, according to Bitcoin Treasuries.

MicroStrategy’s decision to buy BTC as a strategic primary reserve asset – though considered controversial at first – became an important stamp of institutional approval of the crypto’s credentials as a mature, safe-haven asset.

The firm’s Bitcoin Summit in February, where Saylor front-ran corporate bitcoin naysayers, eliminated doubt – if there was any – of MicroStrategy’s new strategy going forward.

No sooner had Tesla CEO, Elon Musk, added #bitcoin to his Twitter profile than the electric carmaker announced the purchase of $1.5 billion worth of BTC. In March, Tesla started to accept bitcoin for payment, but later rescinded the decision due to environmental concerns.

Today, Tesla holds 43,200 BTC valued at $2.1 billion. Altogether, several public companies – and some governments – now hold bitcoin in reserve, much of it bought during the first six months of 2021.

Larry Cermak, vice president of research at The Block, said while institutional adoption remained “extremely speculative, the [crypto] space is now infinitely more mature than ever before. Unlike 2017 when it was not clear, it is now obvious crypto is not going away.”

Legacy financial institutions muscle their way into crypto

A few entities have already been taking multiple forms of crypto for payment prior to 2021. However, that list grew in size this year, as some market leading names such as WeWork, Substack and insurance giant, AXA, began accepting payments in bitcoin.

According to The Block Research’s150-page “Digital Asset Outlook” report, banking and other traditional financial institutions also started to engage directly with cryptocurrencies in 2021.

Companies like PayPal, and BNY Mellon, which has $25 trillion of assets in custody, muscled their way into crypto custody, with strategic acquisitions of like-minded entities. Titans such as State Street and Finserv also claimed a stake in the space.

In March, Goldman Sachs, the U.S. investment bank, relaunched a crypto trading desk that it closed shortly after opening during the 2018 bull cycle. In May, the company executed its first bitcoin derivatives trades.

Immediately after this, another U.S. banking group, Morgan Stanley, said it had opened access to three funds that provide bitcoin exposure for high-net-worth clients. Later in June, Spanish bank BBVA, launched a crypto trading and custody service for private customers from Switzerland.

Bitcoin ETF approval marked with excitement

To cap it all, the U.S. Securities and Exchange Commission (SEC), separately approved three bitcoin exchange-traded funds (ETF) that invest in futures contracts. Applications from Proshares, Valkyrie and VanEck received the green light between October and November.

While the Canadian securities regulator approved Purpose Investments’ bitcoin ETF as the world’s first such product in March, excitement centered around an exchange-traded fund from the U.S., which booked its first application from the Winklevoss twins eight years ago.

It was little surprise when BTC sprinted to a record high of $69,000 on Nov. 10, a few weeks after the SEC’s first ETF approval.

To date, bitcoin futures volume on the Chicago Mercantile Exchange (CME), now used for bitcoin ETFs, have climbed to $700 billion this year from $130 billion a year ago, says the report.

‘It’s been a historic year for cryptocurrency and blockchain technology, and not only due to the rising price of bitcoin,” Emil Angervall, co-founder of Corite, a blockchain-based digital music distributor, told BeInCrypto.

“While the top crypto asset took the spotlight in the first quarter of the year, fuelled by growing corporate and institutional interest…the bigger trend of the year in crypto was the surprise emergence of a lesser-known technology: non-fungible tokens (NFTs),” he added.

Crypto venture capital funding grows

Meanwhile, in 2021, there was more private investment allocated to crypto companies than the previous six years combined [totalling $14.4 billion], said Larry Cermak, The Block VP of research.

So far this year, venture capital (VC) funding into crypto amounts to $25.1 billion, up 719% from 2020. In total, VC money was put in 1,703 crypto or blockchain deals this year.

There were at least 38 venture capital rounds worth an average $176 million each in the crypto space in 2021, the report says, referring to these transactions as “later-stage deals”.

Cumulatively, deals could be worth anything from a few millions to hundreds of millions of dollars. Companies focusing on NFTs or gaming, trading or brokerage, infrastructure and crypto finance attracted the biggest funding.

“2021 was a defining year for the blockchain and cryptocurrency sectors where it matured from a nascent industry to a budding industry that lays host to a diverse set of mid to later-stage firms that are generating revenue,” it said.

“Unlike the previous cycles — most recently, 2017, the sectors were prepared and had the infrastructure in place to service the demand from institutions, traditional investment funds, asset managers, family offices, and high net worth individuals.”

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GamingShiba Becomes CoinMarketCap’s Most Trending Token

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GamingShiba Becomes CoinMarketCap’s Most Trending Token

Streaming, NFT, and metaverse project GamingShiba (GAMINGSHIBA) overtook bitcoin on Wednesday to secure CoinMarketCap’s most trending token. 

The meme coin’s top trending status comes in the same week that Shiba Inu (SHIB) announced its own metaverse project, creating a potential point of confusion for investors seeking to FOMO in. Despite strong similarities in appearance and name, GamingShiba has no relation to Shiba Inu.

GamingShiba is a microcap meme coin, which according to their website holds aspirations to create, ‘a binding bridge between Gamers, Streaming platforms, NFTs and Metaverse’. In a request for further information, GamingShiba says they will “only reveal how they will create this bridge once the project has reached 100,000 holders.”

A tweet on Wednesday declared that the project currently has over 45,000+ unique addresses so investors may have a little time to wait for further information. 

GamingShiba topped the CoinMarketCap trending charts on Wednesday (Source)

The streaming/gaming/NFT/Metaverse project also describes itself as ‘your virtual dog’ and offers the following food for thought on its homepage:

“The modern technology and contemporary ambient that the internet created can not be imagined to function as a whole without cryptocurrency. The impact that the cryptocurrency has on a global scale is astronomical in the sense of being the generator of almost every development and especially the latest one.”

Comparing Shiba Inu and GamingShiba


This seems very familiar

Besides strong similarities in both appearance and name, the development of Shiba Inu’s own metaverse has created fresh point of overlap between the two Shiba-themed projects.

On Monday Shiba Inu teased the launch of the Shiberse in 2022, which the company hails as ‘An immersive experience for our ecosystem’. The Shiba Inu team promises further details at a later date.

In December of 2021 it was revealed that Shiba Inu has a multiplayer collectible card game in the works with development outsourced to the Australian gaming company PlaySide Studios. The final game is expected to be delivered in Q1 2023. 

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Gold, Stocks, and Bitcoin: Weekly Overview — January 27

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Gold, Stocks, and Bitcoin: Weekly Overview — January 27

This week’s overview of price movements for Bitcoin (BTC), gold, and our stock pick Google-parent Alphabet Inc.

BTC

The price of Bitcoin (BTC) in January has gone from bad to worse. Already having dropped coming into the new year, BTC was trading around $44,000 on January 13.

Over the next few days it traded down to $43,000 before reaching $42,000 by January 20. However, after a brief spike, BTC proceeded to plummet into the following days, hitting as low as $34,000 on January 22, and $33,000 on January 24. Buying pressure then returned pushing it back up to $37,000, and as high as $38,000 by January 26.

It is currently trading below $37,000.

According to Caxton market intelligence head Michael Brown, Bitcoin’s recent decline reflects the “institutionalization” of crypto assets, in the sense that they are increasingly traded like other risky assets.

“Unsurprisingly, given that the ‘easy money’ party is now coming to an end, it is the most risky assets — crypto – that are bearing the brunt of the market’s ire,” he said. “With the Fed likely to ramp up the hawkish commentary in upcoming remarks, further downside looks likely.”

GOLD

While gold had a good past week, it has since dropped below last week’s lows. On January 13, the price of gold was roughly $1,824. Over the next few days it traded down to $1,812 by January 19, when it suddenly spiked up to $1,840. Hitting $1,848 on January 20, gold traded down a bit before pushing back up to $1,852 by January 25.

However, by the next day, the price of gold plummeted and is now trading around $1,796.

Gold prices extended losses to a more than one-week low, while the U.S. dollar and Treasury yields rallied, following U.S. Federal Reserve Chairman Jerome Powell signaling an interest rate hike in March. That sent U.S. Benchmark 10-year yields close to one-week highs while the dollar rose to its strongest in over a month.

“The reaction was normal in the sense that Chairman Powell stressed the strength of the economy and the determination to fight inflation,” said Commerzbank commodities analyst Carsten Fritsch.

GOOG

Alphabet has had a pretty dismal start to the new year. Starting out 2022 at around $2,900, Alphabet started falling by January 5 and reached roughly $2,740 by January 7. After gapping down the next trading day GOOG proceeded to push up the next two days, eventually gapping up to $2,850 by January 12. That momentum had reversed the next day, with GOOG gapping down to $2,740 by January 18, then continuing falling, gapping down again to $2,550 by January 24.

Since then however, GOOG has recovered a bit, and is currently trading around $2,640.

Earlier this week, YouTube announced it was considering adding non-fungible tokens (NFTs) to its features for creators this year, according to a letter from the CEO. The letter marks the first time ​​YouTube’s owner, Alphabet Inc.’s Google, has announced integration with the cryptocurrency collectibles.

“We’re always focused on expanding the YouTube ecosystem to help creators capitalize on emerging technologies, including things like NFTs, while continuing to strengthen and enhance the experiences creators and fans have on YouTube,” Chief Executive Officer Susan Wojcicki wrote in her annual letter to creators.

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House members urge US Treasury Secretary to clarify definition of broker in infrastructure law

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House members urge US Treasury Secretary to clarify definition of broker in infrastructure law

“We must ensure requirements imposed on the digital asset ecosystem are both crafted and implemented in such a way to ensure the United States remains at the forefront of financial innovation,” said the letter to Janet Yellen.

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House members urge US Treasury Secretary to clarify definition of broker in infrastructure law

A bipartisan group of members from the U.S. House of Representatives called on Treasury Secretary Janet Yellen to clarify the language in the infrastructure bill signed into law in November around the definition of “broker.”

In a Wednesday letter, House Financial Services Committee ranking member Patrick McHenry and ten other representatives urged Yellen to reference the Keep Innovation in America Act to “ensure that any future guidance” in the November infrastructure bill would provide “the necessary clarity to the digital asset ecosystem.” In addition to the reporting requirements, the lawmakers said that the Treasury Department should narrow the scope of the information a broker can capture, as it would risk “the creation of an unlevel playing field for transactions in digital assets and those required to provide them.”

— Financial Services GOP (@FinancialCmte) January 27, 2022

According to the House members, the current wording of the law would potentially allow the Treasury to interpret which companies and individuals in the crypto space qualify as a “broker,” creating a burden of reporting information to the government they may not necessarily have. This would seemingly require miners, software developers, transaction validators and node operators to report most digital asset transactions worth more than $10,000 to the Internal Revenue Service.

“As nascent financial technologies develop, we must ensure requirements imposed on the digital asset ecosystem are both crafted and implemented in such a way to ensure the United States remains at the forefront of financial innovation,” said the letter to Yellen. “We believe consistent information reporting on digital asset transactions is necessary. However, it should not prevent these technologies and the ecosystem from continuing to flourish due to unclear regulations that only create uncertainty.”

Related: US Congressman calls for ‘broad, bipartisan consensus’ on important issues of digital asset policy

The appeal to the U.S. Treasury Secretary mirrors that of an December letter from six senators claiming the infrastructure law contains an “overly-broad interpretation” of what a broker is and requesting Yellen provide guidance to correct the perceived error. Senators Rob Portman, Cynthia Lummis, Mike Crapo, Pat Toomey, Mark Warner and Kyrsten Sinema urged Yellen to provide a set of rules clarifying the wording “in an expeditious manner.” Lummis and Senator Ron Wyden also attempted to pass legislation that would have changed the tax reporting requirements to “not apply to individuals developing blockchain technology and wallets” on Nov. 15 when the bill was signed into law by President Biden.

To date, none of the proposed measures clarifying the wording in the law have gotten enough support to enact change. Many lawmakers and crypto advocacy groups have expressed concerns that if the law is implemented as is, it could threaten the United States’ position as a nation encouraging the development of innovative technology.

“Our innovators and entrepreneurs can’t wait,” said McHenry. “Secretary Yellen must provide much-needed clarity so this nascent industry can flourish here in the U.S.”

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