Bitcoin BTC price flirts with $23.4K as Jerome Powell reiterates comment on easing inflation; Market weighs DCG Genesis deal with creditors

Bitcoin, Ether Rise as Fed Chair Talks ‘Disinflation’ Again; Market Digests DCG Genesis Creditor Deal

Bitcoin continues its positive but cautious rise as Asia checks into the office, up 2% on the day to $23,276, while Ether is up 3% to $1,671.

Traders were feeling optimistic as Fed Chair Jay Powell reiterated comments from a week ago that the “disinflationary process has begun”. Powell’s dovish comments sent Bitcoin slightly higher, adding 266 points to the Dow Jones Industrial Average and sending the S&P 500 up 1.3% by the end of US markets.

While Powell hinted that the Fed was winning its battle against inflation, he was aware that the time was not yet ripe to declare victory and that further rate hikes were possible if the labor market does not weaken.

“The reality is that if we continue to get strong jobs reports or higher inflation reports, we may need to raise rates more,” the Associated Press quoted Powell as saying. “It was expected to go away quickly and painlessly. I don’t think that’s guaranteed at all.”

Powell said that after more rate hikes, the Fed “needs to see if we’ve done enough.”

Meanwhile, crypto markets were relieved after CoinDesk reported that Genesis and its parent company Digital Currency Group (DCG) reached an initial settlement with its main creditors, meaning a lengthy, chaotic court battle is unlikely.

DCG is also the parent company of CoinDesk.

Speaking on CoinDesk TV, Ram Ahluwalia, CEO of digital asset investment adviser Lumida Wealth Management, said that DCG still had “persistent headaches” after this deal but had “no noose around its neck.”

“It will continue to cost them money, but there is a viable business on the other side,” he said.

Why the venture capital industry won’t miss Alameda Research

Sam Bankman Fried’s empire has been the center of the crypto universe and an active participant in the crypto venture capital community for most of the 2020-2022 period. What impact will his demise have on the industry? Will its presence be missed, or is the VC sector better off without the embattled firm?

The latter, analysts say.

For a while, during the bull run, it seemed like Alameda was involved in most of the hot crypto deals being struck. Data from Pitchbook shows that the former fund closed 38 deals in 2022, which is impressive considering the year has only 52 weeks.

But Alameda Research is no more – bankrupt, along with FTX, in an epic collapse that will go down in history books.

Certainly the market seemed very concerned when it happened. The last two months of 2022 have been a crypto winter as dark as any in history, with prices in freefall and seemingly no end in sight. Things are thawing in January: Bitcoin is up about 40% in the first month of the year.

“We believe there is plenty of dry powder among crypto-native and crypto-focused VC funds to more than fill the fundraising gap left by Alameda and FTX,” said Robert Le, a senior emerging technology analyst at Pitchbook, to CoinDesk in an email.

Le believes that the other big funds that Pitchbook counts on its top 10 list of investors active in crypto, such as a16z, Dragonfly, and Pantera Capital, will fill the gap.

Maybe a fair question, does the VC world want another Alameda? Although the firm closed 38 deals, it wasn’t the biggest investor. That goes to Coinbase Ventures, as Pitchbook puts the number of deals at 121. Still, Coinbase Ventures just doesn’t have the same profile as Alameda. For example, the management team is less well known than Alameda’s high-profile executives.

“The void left by Alameda shouldn’t necessarily be completely filled by the market. It’s possible that their investments supported projects that otherwise would not have had traction, adding to the noise in an ecosystem poised to deliver the next phase of thoughtful innovation,” said Nate George, co-lead of Cumberland Venture Capital .

Looking through Alameda’s investments via CryptoRank, you can see what George means. There are dozens of now highly illiquid, worthless tokens that have investors lining up because Alameda was leading the round and they had Bankman-Fried’s blessing.

If there’s good news for creditors, it’s that Alameda’s collection of portfolio companies is up about 57% over the past month, according to CryptoRank data, compared to a 78% loss over the last year.

It’s not a big deal to sell token holdings, Mark Pfeiffer, bankruptcy attorney at Buchanan Ingersoll & Rooney, told CoinDesk in an email. These ownership interests would be just another position likely to be sold during bankruptcy.

“It will be difficult, but not impossible, for debtors to sell the tokens to monetize them,” Pfeiffer said.

CoinGecko data shows that while there has been an increase in FTT prices and a sharp increase in volume, the spread percentage is relatively high and depth is shallow on most exchanges. It just seems like a fun thing to play around with in the chain rather than something of material value.

But that’s okay. Alameda’s creditors have plenty of other altcoins to sell.

According to a Financial Times report, Digital Currency Group began selling stakes in several investment vehicles operated by its subsidiary and digital asset manager, Grayscale, at a deep discount. DCG is also the parent company of CoinDesk. Ram Ahluwalia, CEO and co-founder of Lumida, shared his analysis. And what’s next for crypto prices? Traders awaited a speech from Federal Reserve Chair Jerome Powell before taking their next steps. Crypto Trader author Glen Goodman and Leichtman Law PLLC Managing Partner David Leichtman joined the conversation.

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