Crypto is dead. Long live crypto

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 the same link. London CNN Business  —  The deepening chasm between the crypto evangelists and naysayers may never have been as…

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 the same link.

London CNN Business  — 

The deepening chasm between the crypto evangelists and naysayers may never have been as stark.

On Wednesday, Andreessen Horowitz, the most prominent Silicon Valley 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” that’s entered the industry in the past year.

“That’s why we decided to go big,” wrote Chris Dixon, a managing partner at the firm.

On the same day, a once-bullish investor made headlines predicting bitcoin could fall to $8,000 from its current level 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 of a bunch of yahoos and backwaters.”

That’s quite a shift since February last year, when Minerd told CNN’s Julia Chatterly that he could see bitcoin, which at the time was trading around $40,000, eventually soar to as much as “$400,000 to $600,000.”

Bitcoin hit its peak of $69,000 in November. It’s 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 about cryptocurrencies and digital money at Davos this year, not to mention a spate of crypto-linked vendors along the town’s famed promenade. But establishment voices at the summit didn’t waste any time disparaging the web3 crowd.

“Bitcoin may be called a coin but it’s not money,” said Kristalina Georgieva, managing director of the International Monetary Fund, 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 watch crypto’s day to day volatility, as well as fringe projects like Terra and Luna enter a “death spiral,” and dismiss the blockchain technology and philosophy underpinning them. But the crypto faithful say that despite its problems, crypto isn’t going away.

For one thing, according to some experts, crypto has to confront its branding problem.

The term cryptocurrency can be misleading, Marcus Sotiriou, an analyst at digital asset brokerage GlobalBlock, told me.

“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 that it’s only a matter of time before all businesses integrate blockchain in some form of way.”

Calls are growing for closer regulation, 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 the number is doubling every year — nearly twice the historical rate of internet adoption.

“Even though sentiment is very, very negative at the moment and it all seems all doom and gloom,” he says, “the actual fundamentals of crypto haven’t changed.”

Here’s Julia Horowitz, the lead writer of Before the Bell, with a dispatch from Davos, Switzerland, where she’s 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’s visited outside Ukraine since Russia invaded three months ago. He was here on a mission to urge business and government leaders to do more to help, and met with leaders from Google, Microsoft and Facebook’s Meta.

“Each of us can do even better,” he said.

Almost 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 tech firms Cloudflare and SAP for continuing to operate in Russia, which he said undermines the effectiveness of the “digital blockade.”

“When a company is working in the Russian market, it pumps funds into the Russian budget from which money gets to the Russian army,” Fedorov said. “This enables killing Ukrainians.”

Germany’s SAP, which makes business software, said in April it planned to exit Russia. But Fedorov said the company is slow-walking its departure and needs to move faster.

“I’m convinced eventually they will leave Russia, sooner or later — but sooner [is better] than later, because people are getting killed,” he said. SAP said in a statement that it’s having “an ongoing dialogue with the Ukrainian government, which included conversations at Davos,” and that it “has stood in solidarity with the Ukrainians since the start of Russia’s unjustified war.”

Cloudflare, meanwhile, has said it is still operating in Russia to protect the flow of uncensored information to Russians.

“They say they allegedly are there to defend some kind of democracy,” Fedorov said.

In a statement, the cloud services operator said it “has minimal sales and commercial activity in Russia” and has “terminated any customers we have identified as tied to sanctioned entities.”

Fedorov emphasized that a “digital blockade” is an important tool to fight back against Russia, since it can 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 convened an emergency meeting with more than 100,000 participants on Wednesday, according to state media. The agenda: Do whatever it takes to save the economy.

During the unexpected video teleconference, Premier Li Keqiang offered what is perhaps the grimmest assessment yet of the state of the economy from China’s leadership. Li said that in some ways it is in worse shape than it was in 2020, during the initial outbreak of coronavirus, my CNN Business colleague Jessie Yeung writes. 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, which is keeping millions of people under lockdown.

Earlier this week, UBS lowered its full-year GDP growth forecast to 3%. China has said it expects growth of around 5.5% this year.

Sustained growth isn’t merely an economic priority. China’s party leadership have maintained their grip on power in part by engineering growth that has lifted tens of millions of people out of poverty. Leaders are especially sensitive to signs of social unrest that could result from diminishing economic prospects.

Earlier this month, Li, the No. 2 figure in the Communist Party after President Xi Jinping, described the country’s economic conditions as “complex and grave.” Despite the hardships, President Xi has only doubled down on the zero-Covid policy, saying the state would punish anyone who questions it.