First Mover Asia: Bitcoin Surges Past $23K Before Retreating

Good morning. Here’s what’s happening:

Prices: Bitcoin continued its 2023, jumping past $23,000 for the first time since August before retreating to trade at about $22,750.

Insights: Microsoft effectively exited the metaverse. Will Apple succeed where other large tech firms have struggled in the space?

Prices

A Weekend Bitcoin Spurt Past $23K

By James Rubin

Bitcoin continued its recent buoyancy over the weekend, rising over $23,000 at one point – BTC's first time above the threshold since early August – before retreating late Sunday.

The largest cryptocurrency by market capitalization was recently trading above $22,750, roughly flat for the last 24 hours but up more than 8% during the past week. Bitcoin has risen roughly 37% this year as investors dismiss various crypto industry headwinds, most recently Genesis Global Holdco LLC filing for Chapter 11 bankruptcy protection, although in an email to CoinDesk, Joe DiPasquale, CEO of crypto fund manager BitBull Capital, said that the rise was typical for first quarters and noted "a long consolidation period that saw shorts accumlating."

"The market has risen, partially fueled the short squeeze," DiPasquale wrote, adding warily that "Bitcoin and several altcoins are overheated and due for a correction. "We wouldn’t be surprised to see Bitcoin testing $20,000 in the coming days."

"For the week ahead, market participants should be mindful of downside risks and potentially seek to take profits."

Ether followed a similar weekend path and was recently changing hands near $1,640, up about 1% from Saturday, same time. The second largest crypto in market value is up approximately 4.5% for the past week and 35% since Dec. 31.

Most other major cryptos assumed a light green hue, although AXS, the token of the Axie Infinity Gaming platform Axie Infinity, and YGG, the native crypto of play-to-earn gaming guild, Yield Guild Games, were up more than 38% and 18%, respectively. The CoinDesk Market Index (CMI), a measure of leading cryptos' market performance, was up slightly.

Cryptos' weekend rise followed a positive Friday for equity indexes as the tech-heavy Nasdaq and S&P 500, which has a strong technology component, jumped 2.6% and 1.8%, respectively. Traditional asset markets have looked optimistically at mounting evidence that inflation is waning without casting the economy into a steep recession, and are hopeful that the U.S. central bank will be ratcheting back its next interest rate hike to 25 basis points (bps) from its more recent diet of 75 and 50 bps increases.

Meanwhile, Signature Bank will not handle crypto transactions larger than $100,000, according to a Bloomberg report that cited a statement from exchange giant Binance. In a statement to Bloomberg, Binance said that Signature, which has been looking to reduce its exposure to crypto markets, would "no longer support any crypto exchange customers with buying and well amounts less than 100,000 USD as of February 1, 2023." Binance said that this would be "the case for all Signature's crypto exchange clients" and noted that some users might "not be able to use SWIFT bank transfers to buy or sell crypto with/for USD" is smaller amounts.

In recent weeks, Signature, which has ranked among the most crypto friendly banks, and other financial services firms have been reducing their exposure to crypto, part of the widening fallout from crypto exchange FTX's implosion. In December, Signature's CEO said the bank would shrink its deposits tied to cryptocurrencies by $8 billion to $10 billion.

Nearly a quarter of the New York-based bank’s $103 billion in total deposits, or roughly 23.5%, came from the crypto industry as of September 2022. But given the recent “issues” in the space, Signature will reduce that amount to under 20% and potentially under 15% eventually, Signature's Joe DePaolo said at an investor conference hosted by investment bank Goldman Sachs.

Despite his cautious outlook for the week, BitBull's DiPasquale was more sanguine about the crypto "market's appetite for risk."

"This is a positive sign for an eventual recovery, but we believe that may need more time and could materialize by end of the year," he wrote.

Insights

Microsoft Exits the Mixed Reality Space – at Least for Now

By Sam Reynolds

Big tech is making massive cuts to its headcount, and Microsoft is no exception. While layoffs were to be expected at the computing giant as it follows the rest of its peers, they have impacted a  specific segment of the company, which might impact exactly what the future idea of the metaverse looks like.

As Windows Central reports, Microsoft has laid off its entire mixed reality team, which was behind its virtual reality, augmented reality, and HoloLens – its enterprise-focused augmented reality headset – efforts. This includes AltSpace VR, Microsoft’s social VR platform which competes with Horizon Worlds.

Microsoft called its augmented and virtual reality efforts ‘mixed reality’, and given the company’s size and scale, it probably had the best shot of making this a new computing paradigm. Microsoft Teams, used widely for collaboration, was fully integrated into the HoloLens as of December.

But the metaverse proved to be a struggle for Microsoft.

While Meta (née Facebook) has gone for the retail side of virtual reality and the metaverse, Microsoft has gone for enterprise users. The premiere enterprise client for the HoloLens was supposed to be the U.S. Army, but Congress isn’t so hot on the idea as test results have been mixed, which has led to limited funding. The head of HoloLens at Microsoft left around the middle of the year. 

If you’re bullish on the idea that the metaverse includes some sort of headset for virtualized reality, this isn’t very good for that thesis.

The Struggle to catch on

VR/AR is far from new, but found new energy when venture capitalists invented the term ‘metaverse’ (to be sure, the metaverse doesn’t necessarily need to include VR or AR).

In the gaming world, VR has struggled to evolve past its status as a niche product. Headset sales have been growing since their widespread introduction in 2016, but this growth has slowed. In late December, consultancy IDC published a new forecast for AR/VR headsets which shows slowing growth for the medium.

Enterprise should have been where VR/AR – and thus the metaverse – succeeded. But this doesn’t really seem to have caught on either. Microsoft chose to axe these teams when it needed to reduce spending because executives, privy to non-public numbers and discussions with potential customers, apparently didn’t see the value the medium.

The unmentioned issue here is Apple’’s presence. Apple has the potential ability to make a market for a product which others have tried to do and struggled. Remember, the iPhone wasn’t the first smartphone. Palm, Microsoft, and Nokia had internet-connected PDAs and phones out before Apple entered the arena. But all of these were largely forgettable compared to the iPhone.

Apple still plans to enter the metaverse in 2024-2025 with a mixed-reality headset, according to a report from Bloomberg. Its original plan of building AR glasses has been postponed due to technical challenges, but the company is still committed.

By the time Apple enters the market, perhaps in 2025, VR/AR would have been around for a decade. Any other medium with such limited performance would be labeled a niche, and the market would move on, not giving it much attention. The question is, can Apple change this where the likes of Microsoft and HTC have struggled?

The idea of the metaverse with a headset displaying a virtualized form of reality is counting on this.

Important events.

9:30 p.m. HKT/SGT(13:30 UTC) Chicago Fed National Activity Index (Dec)

11:00 p.m. HKT/SGT(15:00 UTC) European Commission Consumer Confidence (Jan)

6:00 a.m. HKT/SGT(22:00 UTC) Australia S&P Global Servies PMI (Jan)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Genesis' Crypto Lending Businesses File for Bankruptcy, Winklevoss Threatens Legal Action Against DCG

Bitcoin (BTC) held around $21,000 as Genesis Global Holdco LLC, the holding company of troubled cryptocurrency lender Genesis Global Capital, filed for Chapter 11 bankruptcy protection. This came as Gemini CEO Cameron Winklevoss threatened to sue Digital Currency Group (DCG). DCG owns Genesis and CoinDesk. CoinDesk's News Desk Managing Editor Danny Nelson and Eric Snyder, Wilk Auslander LLP Partner joined "First Mover" to discuss. Plus, Thomas Moser of the Swiss National Bank and Carbonbase CEO Max Song spoke with CoinDesk's Christine Lee from the World Economic Forum in Davos, Switzerland.

Headlines

Genesis Claims $5.1B in Liabilities in First-Day Bankruptcy Filing: Three of the institutional crypto brokerage's entities filed for Chapter 11 protection late Thursday.

Crypto Lender Genesis Is FTX's Largest Unsecured Creditor With $226M in Claims: Genesis Global Capital leads the revised list that un-redacted the names of several creditors.

Crypto Analysts Warn Against Shorting DYDX Ahead of $200M Token Unlock: The token unlock, which will take place on Feb. 2, will release 150 million coins worth about $200 million and 15% of the total supply.

Fantom Blockchain to Fund Ecosystem Projects Using Portion of Burnt FTM Fees: The fund is aimed at empowering builders on Fantom by offering a decentralized avenue for funding projects, ideas and creations through a community-driven decision process.

Digital Currency Group Owes Subsidiary Genesis Global Over $1.65B: Genesis filed for Chapter 11 bankruptcy protection Thursday, listing debts of roughly $3.5 billion.