ALSO: CoinDesk columnist David Z. Morris considers one of the few upsides to the debacles that have deeply wounded the crypto industry in 2022.

Good morning. Here’s what’s happening:

Prices: Bitcoin held steady throughout the Christmas holiday weekend at about $16.9K; most other major cryptos were flat, although tinted more green than red.

Insights: In this last week of 2022, First Mover Asia is revisiting a few of CoinDesk's best and most impactful stories from the past year. In a column last week, columnist David Z. Morris considered one of the upsides to the series of debacles that have deeply wounded the industry. Morris argues that investors' growing uncertainties about crypto's future will root out careless speculation and refocus attention on "good deals and ideas."

BTC/ETH prices per CoinDesk Indices; gold is COMEX spot price. Prices as of about 4 p.m. ET

A Quiet Holiday Weekend for Bitcoin, Other Cryptos

By James Rubin

Bitcoin held steady over the long Christmas weekend as investors largely ignored crypto and the macroeconomic uncertainties that have plagued the world in 2022.

The largest cryptocurrency by market capitalization was recently trading at about $16,900, approximately where it stood 24 hours earlier and about where it finished Friday as markets wound down for the holiday. BTC is likely to continue in the same vein during the year's final days given business' historical, end-of-year slowdown.

"Bitcoin looks like it might be finding a home between the $16,000 and $17,000 zone," wrote Edward Moya, senior market analyst for foreign exchange market maker Oanda, in an email.

Ether was recently changing hands at slightly over $1,200, mirroring bitcoin's changelessness of the past three days. The second largest crypto by market cap was up 0.5% from Sunday, same time. Other major cryptocurrencies were recently flat, although tinted more green than red. XRP, the token of open-source, public blockchain Ledger XRP, was among the biggest gainers, rising 5.4% to over $.36 cents. ADA, the token of decentralized blockchain platform Cardano and MATIC, the token of layer 2 platform Polygon, were both recently up more than 2%.

U.S. equity markets were closed Monday in observance of the holiday weekend. They rose gently on Friday after the University of Michigan's latest consumer sentiment survey showed an uptick in optimism about the economy. Still, the S&P 500, which has a strong technology component, has dropped for three consecutive weeks.

In crypto news, U.S. miners powered down over the weekend as a powerful winter storm swept across much of North America, sending temperatures to historic lows. The Bitcoin mining hashrate, a measure of computing power on the blockchain, dropped about 100 exahash per second (EH/s), or 40%, to 156 EH/s, between Dec. 21 and Dec. 24, data from BTC.com show. It returned to about 250 EH/s as of Dec. 25.

Oanda's Moya was encouraged last week by the court approval of a $37.5 million bankruptcy loan for bitcoin miner Core Scientific. In the agreement, Core Scientific, one of the world's largest miners by computing power, reached a deal with some of its lenders to restructure its debt.

"The crypto miner shares are poised to rally which shows you that investors believe in the restructuring support agreement and are still willing to invest in some of the distressed parts of the cryptoverse," Moya wrote.

Biggest Gainers

Asset Ticker Returns DACS Sector
XRP XRP +5.4% Currency
Terra LUNA +3.7% Smart Contract Platform
Polygon MATIC +2.2% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Gala GALA −1.1% Entertainment
Solana SOL −0.9% Smart Contract Platform
Dogecoin DOGE −0.4% Currency

Insights

There's Less Money in Crypto, and That's a Good Thing

By David Z. Morris

If there’s one big thing that the mainstream coverage has missed about the various collapses in the crypto space over the past year, it’s this:

The downfall of crypto had very little to do with crypto.

Cryptocurrency is the application of blockchain technology to build uncensorable, open-access and immutable global shared ledgers – usually monetary ledgers. But the headline crimes and failures of 2023 were almost uniformly attempts to use financial engineering to turn the future value of those systems into present-day U.S. dollars.

Too often, the finance bros bet big, using the same kind of fragile, nested and interlocking leverage that led to the 2008 financial crisis. Other times they used outright fraud – and they did it off-chain, playing by no rules, with no transparency. They were mistaken for part of the cryptocurrency industry, but it would have been more accurate to think of them as hangers-on and freeloaders, redirecting genuine public interest in crypto to their various unsustainable games.

As in much of contemporary finance, the finance bros were extractive rather than additive. They were not builders, but instead a swarm of hatchling vampire squid, little would-be Goldmans frantically shoving their underdeveloped blood-funnels into anything that smelled like money.

The epic failures of these finance vampires, plus broader economic conditions, mean that 2023 in the crypto world will be a much different year than 2021 or 2022. Hedge fund gamblers and token-shilling hype men will be relegated to supporting roles, where they belong, as the shadowy super-coders who actually make crypto exist move back into the spotlight.

But 2023 will also be different from previous “BUIDL eras,” during which huge squads of nerds were often set free to pursue whatever seemed cool to them. There will certainly still be some of that, but smart leaders will be pushing their teams much more firmly towards clearer goals: Building accessible and reliable front ends, for use cases with real-world demand, then (hopefully) generating revenue from users. The broad public now has a vague idea of what crypto is (for better or worse). The task now is finding out how to sell it as a tool rather than a speculative investment.

This will mean, among other things, less speculation on new tokens, particularly the tokens for new “layer 1” blockchains. In its place will be a relative increase in attention to services that leverage existing, trusted chains and ecosystems to build services with real demand that genuinely require the benefits of blockchains – cross-border fluidity, digital permanence, uncensorability and decentralized governance.

Betting on the future (but not building it)

This future, of course, assumes that the finance bros have been sufficiently embarrassed to feel some vague sense of humility, and that their marks have wised up a bit. Personally, I don’t think that task is quite accomplished. Like unruly dogs beholden to their animal spirits, institutional traders and speculators may still need their noses rubbed into the mess they’ve made. So, let’s do that.

Across many sectors of the economy, the 21st century role of finance has become catastrophically perverted. Rather than risking capital to generate long-term profit by building productive industries, the capital game has become about timing bubbles and picking narratives that will trick naïve investors (retail or otherwise) into becoming bag carriers. Meanwhile you, the pumper, head off to the White Lotus with the cash.

This isn’t a problem specific to crypto – especially not over the past three years. The litany of overbought, undercooked and sometimes just plain rotten companies rolls off the tongue: Clover Health (a 2020 Chamath SPAC joint on the verge of delisting), Meta Platforms (rebranded around an app with no users), Nikola (an electric vehicle fraud that raised $3.2 billion), Tesla (once pumped, now dumped), Theranos ($700 million in venture capital, another fraud).

The task now is finding out how to sell [crypto] as a tool, rather than a speculative investment.

The villains of the 2022 crypto collapse were, with one exception, born and bred in this darkness. They saw little more in crypto than the prospect of good hunting. Su Zhu and Kyle Davies started Three Arrows Capital to trade foreign currencies before transitioning to crypto. Sam Bankman-Fried infamously came to crypto from technical trading at Jane Street. Steve Ehrlich of Voyager Digital formerly helped run E-Trade. Alex Mashinsky was steeped in Silicon Valley tech VC and its accompanying blather. The one exception is Terra creator Do Kwon, who did build a crypto network – but did it on the shifting sands of venture capital, leverage and concealed risk.

Important events

1 p.m. HKT/SGT(5 a.m. UTC): Japan Housing Start (YoY/November)

9:30 p.m. HKT/SGT(1:30 p.m. UTC): U.S. Wholesale Inventories (November preliminary)


All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.

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