Velvet.Capital blog

Weekly DeFi & Crypto Alpha (Feb 1st-7th)

"The disinflationary process has started," perhaps the most important pronouncement of the new year!

Federal Reserve Chairman Powell has injected some hope into the market with his comments Tuesday to the Economic Club of Washington. This comes on the back of a blockbuster US jobs report that came out Friday where the economy added an expectation-defying 517,000 new jobs! Don’t pop the champagne bottles quite yet as this is just the start of a likely multi-year process of disinflation.

But this is good news and exactly the kind of trend we need to see continue to set the stage for the next market rally. Both traditional and crypto markets extended their rally into February. Bitcoin traded as high as $23,300 during the talk. Traditional markets were up as well with the Nasdaq up as much as 1.5% and the S&P 500 by 1.1%; the 10-year Treasury yield is lower by four basis points to 3.61%.

The markets are finally showing us some love & with Valentine's Day right around the corner let's hope the rosiness continues!

Quick Hitters

· Render Network's native token RNDR rose 90% in this past week.

· Bridgewater Associates founder Ray Dalio advocates for cryptocurrency that is linked to inflation, rather than Bitcoin.

· Rolando Brison, a member of the St. Maarten parliament, is pushing to make Tron a legal tender in St. Maarten.

· Tesla reportedly lost around $140M on their Bitcoin investments last fiscal year.

· HashKey Capital recently closed its third round of funding at $500M.

· Bitcoin mining group Greenidge Generation reduced its debt by $61M in securing a deal with NYDIG.

· The CBDC Tracker published an interesting graphic showing the status of CBDCs worldwide.

· Ethereum Developers to Launch Testnet

· Crypto markets rally after Fed Reserve confirms the consensus prediction of a 25 basis points raise.

· Binance launches BUSD on Optimism.

In the News

Premier League gets Ethereum based Digital Cards

Sports NFT group Sorare recently inked a deal with the English Premier League (EPL) to support their digital collectible endeavors. Sorare presents an interesting use case: fans can mint, collect, and trade their favorite players through the blockchain. Buying, selling, and collecting digital collectibles is big business. As fans look for more autonomy, agency, and interoperability surrounding their digital collectibles, NFTs look like a good product-market fit.

UK Treasury Announces Regulatory Framework for Crypto Firms

The UK Treasury recently proposed a new regulatory framework for Crypto Firms wishing to conduct business in the UK. This would call for UK regulators to authorize crypto exchanges before they can legally operate in Great Britain. "The UK government’s priority should be to underline why crypto asset firms should be inside the perimeter," the managing director of Kraken UK, told Decrypt, "Right now, there is little preventing firms based outside the perimeter from providing products and services to the UK market, exposing UK customers and institutions to additional risk." Further regulatory clarity on crypto seems likely, and frankly inevitable.

Real World Assets Can Deliver DeFi’s Promise

The Defiant put together an interesting explainer around Real World Assets (RWAs), and their value within DeFi. The general premise is that RWAs bring more real-world utility and free market concepts to DeFi, rather than technological assurances and speculation. The real world runs on credit, security, and innovation, best summarized in this quote: “As much as we disdain old-school finance in crypto, I think we can all agree that nothing kills financial innovation faster than losing someone else’s money.”

6 crypto investors talk about DeFi and the road ahead for adoption in 2023 did an interesting interview with 6 high-profile crypto VCs about their big predictions for 2023. According to these investors surveyed, between 20% to 50% of crypto pitches are DeFi-focused, showing a lot of attention and emphasis being put on this application. “To stand out in this crowded space, founders should focus on highlighting unique technology and a clear advantage for a specific use case, as well as a defensible moat,” Alex Marinier, founder at New Form Capital said.

Biden Administration’s Crypto Roadmap

The White House published its roadmap regarding cryptocurrency regulation, citing consumer risk as their primary concern. Crypto’s reputation as a wild west has put the industry in bad graces with the suits in Washington, forcing their proverbial hand. The goal of the Administration is to create a regulatory framework for crypto assets to be monitored, registered, and accounted for with the goal of protecting consumers and investors. Fortunately, this signals that a de jure ban on crypto in the US is probably not happening. Besides, regulation can nurture investor confidence.