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Crypto Outlook: Musk Holding on; EU Warning

Some of the big themes in cryptocurrencies recently include regulatory warnings, Elon Musk's thoughts on inflation hedging and Katie Haun's huge funding raise.

European regulators warned investors recently that they could face financial ruin by investing in cryptocurrencies.

The advisory came from the European Union’s securities, banking and insurance realm on March 17th. In the statement, regulators pulled no punches in their assessment of cryptocurrency investing.

"Consumers face the very real possibility of losing all their invested money if they buy these assets," the EU administrators noted.

The statement is the latest broadside the EU has leveled at the crypto sector.

The primary argument is that cryptos come with no regulatory protection and that, if money is lost investing in the sector, a cryptocurrency investor has no recourse in getting the money back. According to the EU, the same scenario holds true if a crypto investor loses money via fraud and scams.

"Consumers should be alert to the risks of misleading advertisements, including via social media and influencers,’ the EU said. “Consumers should be particularly wary of promised fast or high returns, especially those that look too good to be true.”

The EU statement comes at a time when cryptocurrencies are under increased scrutiny by government regulators and finance industry advocates.

One big issue with crypto critics is the top-heavy imbalance among bitcoin investors.

According to data from Banklesstimes.com, the top 100 bitcoin owners hold 14.6% of bitcoins. On the flipside, the number of total bitcoin holders stands at 41 million and is rising every year.

According to the 2022 Global Cryptocurrency Market Insights report by Industry Research, the global cryptocurrency market is expected to grow by 3.5% from 2022 to 2028.

“Out of the total 21 million BITcoin supply, 90% is already minted,” the BanklessTimes report stated. “We can, therefore, expect the number of holding addresses to increase as more people become aware of digital currencies in the coming years.”

TheStreet.com’s investment specialists continue to monitor the crypto market, with these stories in play.

‘Crypto Queen’ Haun Raises New Funding

Katie Haun, the venture capitalist linked to the rise of Coinbase and Open Sea, is at it again. Haun has raised over $1.5 billion in a pair of funds designed to invest in Web3 companies.

Web3 is the third generation of the internet, which includes applications that are built and function on the blockchain such as cryptocurrencies and NFTs.

TheStreet’s Ellen Chang reported that Haun set a new record by raising the largest initial fund by a single female founding partner, according to Pitchbook. “The previous record was set by Mary Meeker, a former investment banker, who raised a $1.3 billion fund after a spin out from Kleiner Perkins,” Chang noted.

Haun, a former general partner at Andreessen Horowitz and co-chair of the firm's three crypto funds, is well known in crypto circles.

During Haun's tenure at Andreessen Horowitz, she and Chris Dixon, her former partner, launched and scaled "one of the earliest and largest dedicated crypto venture franchises in the world," Haun noted in a March 22 blog post that introduced the new VC firm, called Haun Ventures.

Andreessen Horowitz will be a limited partner in Haun Ventures, Chang reported. Dixon and Marc Andreessen, founder of the VC firm both personally contributed to the fund.

Haun was an early adopter of crypto and created one of the government’s first cryptocurrency task forces in 2014.

"In the course of that work, the vast potential of these technologies quickly became clear," she wrote. "Like any tool, they could be used for good or for bad, but we had just started to scratch the surface of the good."

The size of the fund enables her venture to invest next to other crypto investors, Chang noted.

“One of the unique things about our fund size is that we don’t have to lead every deal, we can play well with a lot of other crypto investors. Founders don’t want a single investor on their cap table, even in the early rounds,” Haun told CNBC.

Blockchain start-ups are still attracting capital from investors and netted $25 billion from venture capitalists in 2021, an eightfold jump, according to recent data from CB Insights.

WisdomTree’s Steinberg Sees Bigger Payments Role for Blockchain

Real Money’s Doug Kass points to a more robust role for blockchain in the payments and financial space.

"It's the convergence of blockchain technology with universal smartphone ownership and tokenization with smart contracts that will effectively blur the lines between savings, payments, and investing, fundamentally changing the way consumers view and interact with their own money and assets," WisdomTree Investments (WETF) Founder and CEO Jonathan Steinberg said during a recent company earnings call.

Steinberg’s company is rolling out WisdomTree Prime, a digital wallet that leverages the blockchain, to “bring the look and feel that users are accustomed to from traditional mobile apps, while at the same time offering the benefits of the digital financial services experience built on DeFi principles," Steinberg said.

The new wallet, which will be tested this spring and introduced formally by year-end, is expected to target the burgeoning digital payments and financial transaction market

"As a first mover in launching blockchain-enabled funds and tokens, we have an opportunity to dominate the market in both beta and alpha generating strategies, large addressable markets where we can generate great economics, scale quickly, and significantly accelerate organic growth," Steinberg said. "We are so confident that assets will move to the blockchain because the efficiencies and enhancements are just too substantial to be ignored.”

Elon Musk Holding Tightly To His Cryptos

Tesla founder Elon Musk may have made news last week when, via Twitter, he challenged Russian President Vladimir Putin to a bare-knuckled brawl.

But it’s Musk’s views on his investments – and his cryptos – that investors may find more illuminating.

“Musk caught the attention of cryptocurrency enthusiasts recently after tweeting that while he views physical property or stocks as better hedges to inflation, he would hold onto his bitcoin, Ethereum and Dogecoin,” said Ross Mac of Maconomics, and a host on TheStreet’s Crypto Minute video cast.

“Last week, Musk challenged Putin to a 1-on-1 combat...and right before that, his Twitter fingers were showing some love to the crypto market,” Mac said. “It all started with a question for his followers about their thoughts on the inflation rate over the next few years.”

According to Mac, that prompted MicroStrategy CEO Michael Saylor to pitch the value of Bitcoin as an inflationary hedge. ‘Elon made a joke saying that obviously Saylor would say this but went on to add that he actually prefers physical property and stocks when inflation runs high,’ Mac noted.

“However, Elon did say that he won’t be selling his Bitcoin, Ethereum and Dogecoin, giving bulls something to celebrate,” he added. “Bitcoin and Ethereum are both down about 15% and 30%, respectively year to date. Do you think we see a rebound coming?”

Ethereum co-founder has a ‘problem’ with NFTs. On the March 21st edition of Crypto Minute, host Katherine Ross dug into a recent Time magazine interview with Ethereum founder Vitalik Buterin.

Buterin, who lit social media afire when he told Time he didn’t know who seven-time NFL Super Bowl champion Tom Brady was, apparently isn’t big on the non-fungible token (NFT) market, either.

“Here's why Vitalik Buterin won't be buying a Bored Ape anytime soon,” Ross said.

The co-founder of Ethereum has a crypto concern. “Buterin said that crypto as a whole has "dystopian potential" if implemented wrong,” Ross noted.

He spoke out against NFTs as well, specifically speaking about his concerns around the flashy wealth within crypto and how that impacts spaces such as NFTs. “When discussing Bored Ape Yacht Club NFTs, which can be valued in the millions, he said that it's a "different kind of gambling,” she added.

But it's not all negative, Buterin told Time he maintains hope that ETH will become the launchpad for sociopolitical experimentation, despite the current public perception