Raphael Stevens

Investors will need to accept the trajectory and level of volatility in bitcoin as the digital currency becomes more widely adopted globally, according to SkyBridge Capital’s Anthony Scaramucci.Following a run to an all-time high above $63,000 in April, the price of bitcoin has swiftly tumbled in a matter of weeks — at one point even more than halving from those earlier highs. Still, it’s gained more than 10% since the start of 2021. As of 2:35 a.m. ET Wednesday, the price of bitcoin was at $33,744, according to data from Coin Metrics.”I will point out that bitcoin is still up on the year, so it’s actually been a very good performer this year.,” Scaramucci told CNBC’s “Capital Connection” on Tuesday.Skybridge Capital has “about $500 million” in bitcoin, according to Scaramucci, founder and co-managing partner at the firm as well as a CNBC contributor.He said bitcoin is still only in its early adoption stage and is set to become a “replacement” for gold, adding: “We actually like the upside characteristics and are willing to accept the volatility in bitcoin.”Dado Ruvic | ReutersThe largest cryptocurrency by market capitalization, according to CoinMarketCap, bitcoin is often pitched as a potential rival to gold as a long-term store of value. At present, however, bitcoin’s price tends to be exponentially more volatile than that of gold.”If you went back to Amazon’s IPO back in 1997, if you held that stock, $10,000 of that stock on its IPO is now worth $24 million. But you would have subjected yourself to eight periods of time where the stock dropped at least 50% as it was scaling, pursuant to Metcalfe’s law,” he said.Metcalfe’s law states that the value of a network is proportional to the square of its users. Skybridge’s research department expects bitcoin users to reach a billion by 2025, from the 125 million at present, Scaramucci said.”Think of the phone system back in the early 1900s as people started to buy those phones and connect to each other,” he said. “That’s sort of what’s happening to bitcoin right now.””I’m very confident that we’ll be sitting here a year or two from now and talking about this volatility, but also being amazed at the upward trajectory of bitcoin over the next 24 months,” Scaramucci said. More

In this article9984.T-JPThe logo of SoftBank Group in Tokyo.Philip Fong | AFP via Getty ImagesLONDON — SoftBank is aiming to put its money where its mouth is on diversity.SoftBank Investment Advisers, which manages the Japanese conglomerate’s Vision Fund for tech investing, said Wednesday it will launch its diversity-focused Emerge accelerator program in Europe.The company first introduced Emerge last year in the U.S. with WeWork Labs, the office rental firm’s start-up incubator, to back 14 start-ups whose founders come from underrepresented backgrounds. SoftBank says it has invested $5 million across 13 start-ups in the program so far.Now, SoftBank is bringing Emerge to Europe — but with a twist. This time, it’s bringing in Speedinvest and a number of other notable venture capital investors in the continent to provide access to a broader network of potential investors and partners.”Softbank is a famous investor in the later stages, with massive global successes” such as Uber, Oliver Holle, co-founder and managing partner of Speedinvest, told CNBC in an interview. “But they are not set up for investing in those very early nascent stages of company building.”Other venture funds participating in the European program include Breega, Cherry Ventures, firstminute capital and Kindred.Start-up accelerator programs are a common way for entrepreneurs to get access to mentorship in the early days of building their company. Many well-known tech firms today applied for accelerator schemes and went on to launch successful businesses, including Stripe, Airbnb and Coinbase.Catherine Lenson, managing partner and chief human resources officer at SoftBank Investment Adivsers.SoftBankTwo key differences between conventional accelerator programs and SoftBank’s is that the latter not only focuses on founders from Black and other minority backgrounds — it also invests in the companies.”It changed from being an accelerator about connections, tools, networks and opportunities to being an accelerator which funded the companies at the end of it,” Catherine Lenson, managing partner and chief human resources officer at SoftBank Investment Advisers, told CNBC.Last year, the murder of George Floyd and subsequent Black Lives Matter protests against police brutality and racism sparked discussions in boardrooms about how companies should address diversity. Tech is a sector that has gotten a bad rap for diversity, with people working in the industry predominantly white and male.Various tech investors — including SoftBank and Andreessen Horowitz — have come up with initiatives aimed at tackling the issue. Some firms, like London-based Ada Ventures, backed new standards for venture capital that bring diversity to the forefront of investment decisions.In Europe, about 91% of venture money went to start-ups with all-male founding teams last year, according to a report from Atomico. And 62% of underrepresented founders found it more difficult to raise cash, up from 31% in 2019.”What we’re seeing is that founders from a diverse background were going through incredible incubators very early in their life,” said Lenson. But “as they came to later funding rounds, what we were finding was that doors were still closing for them,” she added.SoftBank’s Emerge program, which lasts eight weeks, will be open to a cohort of companies at seed stage that already have a viable product with potential to scale, and at least one founder who identifies as non-white, female, LGBTQ+, disabled or a refugee.The investors would then back successful start-ups’ seed rounds, with SoftBank injecting up to $2.5 million and Speedinvest matching this sum, Holle said. The other venture capital firms would participate with smaller commitments.Due to the coronavirus pandemic, SoftBank wasn’t able to run its 2020 program in person as originally planned. Lenson said the same would go for this year, however she hopes there could be an in-person component as travel restrictions ease in the coming months.Emerge isn’t SoftBank’s first diversity-focused investing initiative. The company also created a $100 million “Opportunity Fund” for minority-owned businesses, for example. SoftBank doesn’t have the best track record on backing diverse teams, however, having invested in only a handful of companies created by Black or female founders. More

ERIC ZHU, an international sales manager at a Chinese forklift-maker, has just sent his second letter of the year to customers, explaining that prices are going up once again. “We need to share some of the price increases with our partners. We cannot absorb them all ourselves,” he says. “The world is crazy now.” Although not standard economics terminology, crazy is a good description for the price movements now coursing through global markets. Inflation in America is running at its fastest since 2008. Energy and commodity prices have soared. And as Mr Zhu can attest, investors and company bosses are worried that China, the world’s workshop, is itself starting to export inflation.It is easy to see why people are concerned. On June 9th China reported that factory-gate prices rose at an annual rate of 9% in May, the highest in more than a decade. That, together with soaring shipping costs and a stronger yuan, will probably push up the prices of made-in-China goods, from phones to futons. Chinese imports in America already cost 2.1% more in April than they did a year earlier, the fastest rise since 2012 (see chart).Yet the danger of China-exported inflation can be overplayed. Only part of the rise in its producer prices can be directly attributed to China. Its strong economic recovery was led by investment in homes and infrastructure, which pushed up the price of steel. In order to meet green targets, the government has reined in both coal and steel production. Officials have also vowed to crack down on “excessive speculation” in domestic commodity futures, suggesting that this aided the run-up in prices.The bulk of the price pressures instead reflects the peculiarities of the covid-clouded world. The global demand for consumer goods—things you can buy online while confined at home—soared during the past year. Chinese exports are about 20% higher than their pre-pandemic trend, and factories have struggled to keep up with all the orders. Disruptions to global commodity supplies, such as lockdowns that limited copper mining in Chile and Peru, have also pushed up prices.Rather than transmit the shock, Chinese companies have absorbed much of it. Compared with the end of 2019, before covid-19 upended the world, factory-gate prices in China have risen by nearly 6%. But an index measuring the cost of manufactured consumer goods in China went up by just 0.6%. Companies have had to get by with thinner margins. No wonder Mr Zhu wants to share the pain with customers.Moreover, the policy environments in China and America are very different. Unlike the Federal Reserve’s dramatic monetary easing, the People’s Bank of China has been far more conservative. Cautiously, it has started tapering its support measures. This may be one factor in the divergence between the two countries’ inflation trajectories. In America, “core” consumer prices, excluding food and energy, rose by 3.1% year-on-year in April, the highest rate since 1992. In China, the core index rose by just 0.9% year-on-year in May. (The central bank can also thank farmers for helping quell inflation. A recovery in pig stocks after an outbreak of African Swine Fever has brought pork prices down by nearly a quarter compared with last year.)Taking a longer view, some analysts think that China’s ageing population will transform it into an inflationary force. In the early 2000s, low wages in China helped make consumer goods cheap around the world. That suggests that shrinking labour supply and rising wages in China should have the opposite effect. Yet this is not so clear-cut. Low-end manufacturing is already moving to cheaper places like Vietnam and Bangladesh. A rapid increase in automation in China has helped restrain prices.For now, though, the pressing question is whether China’s input-price inflation will be transitory or more enduring. The answer lies outside China. As the vaccine roll-out gains traction and something closer to normal life resumes in America and Europe, people are likely to spend more on services such as tourism and eating out, not just on goods bought online. That would ease the pressure on commodities and, by extension, on China’s factories. More

MIAMI IS THE mecca of anti-establishment finance. Or so it seemed on June 4th-5th, when 12,000 people clad in everything from flannel suits to festival gear and whale-shaped hats descended on the world’s biggest bitcoin conference. On stage crypto gurus such as Jack Dorsey, Twitter’s boss, praised those striving for fortune and freedom. The crowd erupted when Nayib Bukele, El Salvador’s president, announced plans to make bitcoin legal tender. (On June 9th lawmakers approved his proposal.) “This is not a moment,” beamed Miami’s mayor. “This is a movement.”The movement is far from its destination. Now in its 13th year, bitcoin has become an investment sensation. But, Mr Bukele’s enthusiasm aside, it remains a costly and hardly used medium of exchange. A host of smaller cryptocurrencies, meanwhile, are rushing in. Fully 10,000 are listed on CoinMarketCap, a website, nearly twice as many as a year ago. Bitcoin accounts for 40% of the total value of all cryptocurrencies today, compared with 70% in January. Elon Musk, an electric-car tycoon whose tweets seem to make the weather in crypto markets, says he now favours younger rivals. Could one of them steal bitcoin’s crown?Most do not want to. Many listed on exchanges are “tokens”, which can become tools of speculation but, in contrast to “coins”, do not aspire to the full functions of money. The purpose of “security” tokens, like that of stocks and bonds, is investment: they represent ownership in firms or other assets, recorded on a distributed ledger. “Utility” tokens, meanwhile, are tradable credits that can be bought and used in exchange for a service. Crypto exchanges, for example, sell tokens that punters use to pay transaction fees. That still leaves 776 coins. Many are tiny: just 110 have a market capitalisation exceeding $100m. Some are fads and will prove fleeting. The more serious contenders fall into two categories: the “bitcoin clones” seek to fix the cryptocurrency’s flaws as a means of payment; and the “ether clones” aim to perform new functions. Consider the bitcoin clones first. One problem with bitcoin is its volatility: in the space of a few hours on May 19th, for instance, prices fell by 30%. To avoid such swings, so-called “stablecoins” track government-issued (or “fiat”, in the crypto-lingo) currencies instead. Other clones try to fix bitcoin’s privacy problems. Since all bitcoin transactions are recorded on its blockchain, which is public, they leave a trail. On June 7th American officials said they had recovered $2.3m-worth of a ransom paid in bitcoin to the hackers who shut down the Colonial Pipeline in May, after identifying the virtual wallet they had used. Some coins try to provide greater anonymity by using masking tech. Monero, for instance, tries to make it hard to link flows to a fixed identity, trace funds or observe transaction size. Still other clones try to make payments cheaper and quicker to process. To ensure that transactions are legitimate without relying on a central authority, bitcoin relies on a system called “proof of work”, where “miners” compete to validate blocks of transactions by solving time-consuming numerical problems. Yet bitcoin’s design is such that it can handle only around seven transactions per second. The creator of Litecoin therefore tweaked the algorithm so that new blocks are processed more often. Dogecoin, a coin that was developed as a joke and which often features in Mr Musk’s tweets, has no cap on its supply. More radical alternatives, such as Cardano and Tron, have switched to “proof of stake”, under which validators get rewarded in proportion to the number of coins they lock into an escrow wallet while transactions are verified. The process involves less hardware and fewer energy costs. But for every flaw that the clones try to fix, a desirable attribute of bitcoin seems to be lost. Stablecoins, for instance, require users to trust both the issuer (which must hold hard cash in reserve) and a government, defeating crypto’s original anarchic aims. Some look hardly worth the trust. In February the issuer of Tether, the biggest, was fined $18.5m by authorities in New York for lying about its dollar stash. Big exchanges have delisted the ultra-private Monero, fearing its potential for money-laundering. Dogecoin is even more volatile than bitcoin. The proof-of-stake system, meanwhile, encourages hoarding, limiting liquidity. It also favours concentration, which goes against decentralisation, says Eswar Prasad of Cornell University. These trade-offs may be why none of the clones has come close to overtaking bitcoin (see table). According to analysts at Brave New Coin, a research firm, alternative measures, such as activity on GitHub, a platform used by programmers to collaborate on projects, show that bitcoin remains uniquely popular.The threat comes instead from currencies with nimbler blockchains that can do more than record payments. Ethereum, which hosts ether, the second-most-valuable cryptocurrency, can execute automated programmes that, for example, move money between wallets only after a specific event. Ether and its clones have become central to the budding field of decentralised finance (DeFi), where “smart contracts” replicate sophisticated financial transactions, such as making loans or offering insurance, without a trusted intermediary. That is boosting adoption. Over the past 12 months DeFi drove 40% of ether transactions, up from 7% in the previous period, reckons Chainalysis, a data firm.With around $62bn in capital deposited in its applications, DeFi remains small. But it is growing fast, and bitcoin, with a blockchain that cannot accommodate smart contracts, is ill-equipped to ride the wave. Its first-mover advantage and scarcity make it likely to remain attractive as a speculative asset. Yet that could prove poor consolation.■ More