From the Editor’s Desk
Dear Reader,
To borrow a phrase from the ancient Roman poet Virgil, fortune favors the bold. That credo appears to have been top of mind at Otherside Metaverse as it launched a tech demonstration over the weekend amid ongoing carnage in the cryptocurrency industry that has included the bankruptcy of crypto lender Celsius.
Skeptics, alternatively, might be tempted to venture that the boldness on display by Yuga Labs’ metaverse unit in such turbulent times suggests it’s inhabiting a parallel universe. Whatever the reality, Otherside’s move is a welcome reminder that all crises — even those as large and seemingly bottomless as the one in which the crypto sector is engulfed — ultimately pass.
How else to account for the fact that traditional finance players — including some of the most storied institutions on Wall Street — are still taking such an interest in digital assets, seeking bargain buys and inking partnership deals in what may be shaping up as an Empire Strikes Back-style raid on the upstart industry? Fortune indeed favors the bold — or, perhaps more in keeping with the seemingly endless ability of institutional finance to reinvent itself as circumstances render expedient, fortune favors the banks.
Fortunes in crypto now are nothing if not mixed, in any case, and not only in those jurisdictions in which the industry operates relatively unhindered. In China, too, digital assets have had both a good week and a not-so-good one.
The bad news first: Tencent News shuttered its non-fungible token (NFT) marketplace amid a drop-off in sales (and a steady stream of thinly-veiled threats made to the industry through state media outlets). Now for the good news: Shanghai’s municipal government appears to be embracing digital assets, having included NFTs, metaverse, blockchain and Web 3.0 as priorities for development in its digital five-year plan.
Given the Chinese government’s years-long hostility to private digital assets — and to all things crypto, in particular — might Shanghai’s move into the space signal the emergence of a bold new frontier for China in Web3? A reminder that while the players may change, the industry endures.
Until the next time,
Angie Lau,
Founder and Editor-in-Chief
Forkast
By the numbers: Celsius — over 5,000% increase in Google search volume.
Crypto lender Celsius Network has filed for bankruptcy, with its balance sheet blowing out to the tune of US$1.2 billion, making it the latest casualty of the recent crypto crash that has wiped out a series of big names in the industry.
Forkast.Insights | What does it mean?
Crypto is learning painful lessons, but at least it appears to be learning them quickly. The implosion of Celsius marks the second occasion on which the crypto lending industry has had to rethink its business model.
Less than two years ago, DeFi platforms were offering yields up to 10,000% per annum during a “vampire mining” frenzy. Newly minted platforms sucked liquidity out from other platforms for tokens with little value, a practice that imploded when the anonymous owner of SushiSwap was accused of rug-pulling their own platform.
DeFi interest rates are now lower, but the competition for investor cash is still just as intense. Celsius was one of a group of CeFi lenders that promised better security and a better user experience than DeFi lenders, but with the promise of high-interest returns.
The problem with these business models is they relied on institutional investors needing a steady supply of crypto to make big bets on markets. They then passed on the interest they charged to customers who loaned the platform the money.
When those institutional investors saw their portfolios shrinking and inflation rising, they fled, leaving Celsius’s business model high and dry. Given crypto’s historic volatility, that model seemed precarious, at best.
With other CeFi lenders such as BlockFi now in deep trouble, the industry is going through its second crisis in less than 12 months. If necessity is the mother of invention, the next batch of crypto lenders will need to prove they can be sustainable beyond the boom times.
By the numbers: Bored Ape Yacht Club — over 5,000% increase in Google search volume.
Otherside Metaverse, a gamified metaverse project based on plots of virtual land and with connections to the Bored Ape Yacht Club, has launched a demonstration with more than 4,300 participants as sales of the project’s Otherdeed NFTs passed US$1 billion.
Forkast.Insights | What does it mean?
Crypto needs a success story right now, but is this the right one? Despite markets appearing to have reached the bottom following the crash, the slew of busts and bankruptcies across the industry has badly tarnished crypto’s reputation.
Although metaverses aren’t beyond the volatility of broader markets, they represent a use case beyond mere token speculation. Otherside is attempting to combine virtual worlds popularized by games such as Fortnite with the ownership and trading capabilities found in blockchain.
Yuga Labs has positioned itself as the David to Meta’s Goliath. It believes the metaverse it is building stands in opposition to Mark Zuckerberg’s centralized version. But while other metaverse projects are open to all, Otherside has taken a decidedly more exclusive approach to its initial phase: it’s accessible only to digital landowners. The price of admission? Around US$4,000, according to CoinGecko, not including the base cost of a Bored Ape Yacht Club NFT.
Some in the crypto space believe this stands in stark contrast to the community’s broader ideals. But if Otherside succeeds, it could open the door to other projects — and investor cash — in metaverse development. And that’s something crypto needs a lot of right now.
Chinese tech giant Tencent has suddenly closed, without public warning, the non-fungible token (NFT) marketplace that it had hosted on its Tencent News app.
Forkast.Insights | What does it mean?
Tencent News’s move to shut down its NFT marketplace is likely associated with a leadership change. Wang Shimu, the former head of Tencent News, left Tencent’s news division in May and was reassigned to Huanhe due to the underperformance of the news operation, according to local media reports.
Overall, the buying frenzy around digital collectibles in China appears to have quieted down, mirroring the NFT-buying slump in the rest of the world. Analysts from Caitong Securities wrote in a research note at the weekend that the NFT platforms in China had collectively issued about 8.6 million yuan (US$1.3 million) worth of digital collectibles last week, a 12% drop from the previous week.
But surprising support for NFTs is also coming from local government authorities. The Shanghai municipal government, which is trying to bring the city out of its struggles following its recent months-long Covid lockdowns, clearly sees economic opportunities in NFTs and digital assets. In a policy paper published last week, Shanghai authorities wrote that the city intends to support enterprises exploring the setup of NFT trading platforms and those researching and piloting asset digitization, the trading of digital intellectual property, and digital ownership.
Shanghai’s government has also set a goal of growing its metaverse-related industry to a total value of 350 billion yuan by the end of 2025, according to a policy paper published last month.
Aside from Shanghai, other local governments across China have issued more than 40 other policy documents to support metaverse-related enterprises, according to data from Chinese think tank 01 Caijing.
Nonetheless, Chinese companies in the space face a new challenge: keeping buyers interested. That, combined with pervasive and ongoing regulatory uncertainty, may keep China’s NFT and metaverse industry under a degree of pressure even more effectively than any official scolding and warnings channeled through Communist Party-controlled media.
Forkast.News is a digital media platform that covers stories about emerging technology at the intersection of business, economy and politics. From Asia, to the world.
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