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South Korean VC firm Hashed lost more than $3 billion in LUNA collapse

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South Korean VC firm Hashed lost more than $3 billion in LUNA collapse

South Korean VC firm Hashed lost more than $3 billion in LUNA collapse Christian Nwobodo · 7 hours ago · 2 min read

Hashed CEO Simon Seojoon Kim confirmed to Bloomberg that the firm lost over $3 billion from investing in LUNA.

2 min read

Updated: August 3, 2022 at 10:40 pm

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Cover art/illustration via CryptoSlate

Hashed CEO Simon Seojoon Kim disclosed in a Bloomberg interview that the VC firm lost more than $3 billion from its investment in LUNA after it crashed in May 2022.

Hashed bought about 30 million LUNA tokens as an early investor in Terraform Labs’ $25 million venture round, conducted in January 2021.  According to Kim, Hashed held on to the tokens and lost a fortune from the crash.

In accessing the extent of the loss, LUNA’s price peak of $116.11 on April 5 was used, and it revealed that the firm’s token would have been worth $3.6 billion. The crash saw LUNA dropping to a few cents after the UST stablecoin lost its peg. Consequently, over $40 billion of investors’ funds was lost in the crash.

Kim, however, confirmed that his firm would continue investing in the blockchain sector, despite the setback it experienced. He said:

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“In the tech sector, there’s no such thing as a portfolio that guarantees success, and we make our investments with that in mind. We believe in the community’s growth, and that has never changed.”

Hashed still Investing

Kim told Bloomberg that plans are underway for the firm to raise more funds in the first half of 2023. It is now looking to invest more in blockchain-based gaming startups.  He is optimistic that the virtual game world would become more interconnected with the real economy, as non-fungible tokens evolve to serve as a bridge.

Hashed has so far deployed $320 million in two venture funding rounds. Its first fund of $120 million was launched in December of 2020. Blockchain startups including dYdX, Mythical Games, Republic, Chai, and NFTBank, were among the recipients of the funds.

The VC firm launched a $200 million fund in its second round. A large portion of the funds was invested into startups raising seed to Series B funding.

Venture Capitals still funding crypto startups

During the first half of 2022, venture capitals invested $17.5 billion in crypto startups, according to data from PitchBook. The first quarter recorded the largest inflow of $9.85 billion, while $6.76 billion was invested in the second quarter, showing a 31% decline from the previous quarter. The crypto winter contributed to the declines as many crypto startups were losing their valuations.

VC Portfolio Manager at Arca David Nage, however, argued that the decline in funding may not persist as some VCs are still investing while others are waiting for company valuations to cool down before deploying their funds anywhere from September. 

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Nage said.

“There’s been this kind of viral dialogue that sometime around September, valuations are gonna come down even more significantly and it’s just gonna be a frenzy,”

Bear Market

Huobi founder Leon Li in talks to sell his shares for up to $3B

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Huobi founder Leon Li in talks to sell his shares for up to $3B

Huobi founder Leon Li in talks to sell his shares for up to $3B Zeynep Geylan · 46 mins ago · 2 min read

Huobi Group’s founder Leon Li is reportedly in talks with Tron founder Justin Sun and FTX founder Sam Bankman-Fried to sell his majority stake in the exchange.

2 min read

Updated: August 12, 2022 at 11:51 am

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Cover art/illustration via CryptoSlate

Crypto exchange giant Huobi’s founder and CEO Leon Li is in talks with investors to sell his majority stake for $2 billion to $3 billion.

According to a Bloomberg News report, Tron founder Justin Sun and FTX founder Sam Bankman-Fried (SBF) are among the interested parties.

Li holds nearly 60% of Huobi Global’s shares. If Li manages to sell them for $3 billion, it’ll mark the largest takeover in the market since the market cap fell below $1 trillion.

A spokesperson from Huobi confirmed Li’s decision and said:

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“[Li] hopes that the new shareholders will be more powerful and resourceful, and that they will value the Huobi brand and invest more capital and energy to drive the growth of Huobi,”

So far, spokespeople from FTX declined to comment, and Sun said he didn’t have any negotiations with Li regarding the sale.

Huobi Global

Li launched Huobi global in 2013, and the company became one of the largest crypto exchanges. However, it lost momentum when it shut down operations in China in November 2021. The decision came after the Chinese government deemed crypto transactions illegal. The decision hit Huobi harder than any other exchange, as China was Huobi’s primary market.

The exchange has expanded overseas to countries like Turkey and Brazil and is currently considering expansion by obtaining a FinCen license. However, giants like Binance and FTX appear to be Huobi’s competitors in those regions.

Li’s decision to sell his shares was leaked in July 2022 but wasn’t confirmed. At the time, Huobi was also expected to downsize and lay off around 30% of its staff — roughly 300 people. The exchange said that the bearish market conditions posed a financial challenge and that the company would cut costs, including layoffs.

Emergence of M&A

FTX has been bullish on Mergers & Acquisitions since the beginning of the bear market. At the end of May, FTX U.S. president Brett Harrison said that FTX was looking to spread worldwide by acquiring companies with the necessary regional licenses. He said:

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“We’re doing that globally, in places like in Japan, Australia, in Dubai, different places where we’ve been able to either partner with local companies or sometimes do acquisitions to be able to get licenses that we need,”

On the other hand, SBF was sure that many crypto exchanges and mining companies would fail in the current winter market. SBF said that he saw this as an opportunity to purchase companies that need a saving hand.

Following his words, FTX approached Bithumb, BlockFi, and Voyager Digital to purchase their organizations.

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Bear Market

Hotbit exchange suspends all transactions indefinitely

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Hotbit exchange suspends all transactions indefinitely

Hotbit exchange suspends all transactions indefinitely Zeynep Geylan · 5 hours ago · 1 min read

Due to having its assets frozen as a part of an ongoing investigation, crypto trading platform Hotbit announced it suspended all functions. The exchange said the services will go back to normal as soon as the assets are unfrozen.

1 min read

Updated: August 10, 2022 at 6:10 pm

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Cover art/illustration via CryptoSlate

China-based crypto exchange platform Hotbit announced its assets were frozen due to an ongoing investigation of the company, and it had to suspend all trading, deposit, and withdrawal functions until its assets were released.

An Aug. 10 post on the company’s website stated:

“We regret to inform you that Hotbit will have to suspend trading, deposit, withdrawal and funding functions, the exact time of resumption cannot be determined at the moment.”

The exchange ensured that all its customers’ funds were safe and secure, and it will return to business as usual as soon as the investigation is over.

Investigation freezes company assets

According to the announcement, a management-level employee got involved in a project in 2021, which the law enforcement now suspects violated criminal laws.

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Hotbit claims that the project was against the company’s internal principles, and the managers’ involvement in this project was unknown to Hotbit. The employee in question left Hotbit in April 2021.

Regardless, the investigation started on the suspected project found its way to Hotbit because of its ties to Hotbit’s former manager. The announcement clarified that no other Hotbit employees have played a part in the project under investigation. However, they have been assisting the ongoing investigations since July 2022. In the process, the company got some of its assets frozen, which prevented the exchange from running normally.

The Hotbit team ensured that the assets were secure. The post stated:

“Hotbit will resume normal service as soon as the assets are unfrozen. All user’s assets and data on Hotbit are secure and correct.”

In the meantime, the exchange said it’s working on a compensation plan for its users to publish soon. Also, all leveraged ETF positions are forcibly liquidated based on relevant net values on 12 PM UTC, Aug. 10, to prevent losses due to holding positions.

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Coinbase reports $1.10B loss in Q2 as assets on exchange slump

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Coinbase reports $1.10B loss in Q2 as assets on exchange slump

Coinbase reports $1.10B loss in Q2 as assets on exchange slump Liam ‘Akiba’ Wright · 2 hours ago · 3 min read

Coinbase reported the biggest loss ever in Q2, losing more than $1B over the past 3 months. Assets held on the exchange also fell to just $96 million.

3 min read

Updated: August 9, 2022 at 11:14 pm

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Cover art/illustration via CryptoSlate

Coinbase Global’s second-quarter results show that the crypto exchange recorded a net loss of $1.10 billion during the period. This compares to a loss of $430 million in the first quarter and a net income of $1.61 billion in the second quarter of 2021.

Net revenue for Q2 came in at $803 million, down from $1.17 billion in Q1 and $2.03 billion in Q2 2021, according to the Aug.  9 shareholder letter.

The value of crypto assets on the exchange fell to just $96 billion in Q2 from $256 billion in Q1. A year ago, in Q2 2021, the assets on the exchange totaled $180 billion.

Source: SEC filing

Coinbase also pointed to four major crypto asset price cycles the space has seen since 2010, noting in the below graph that from the most recent peak in November 2021 to the lows in June 2022, Bitcoin market capitalization has declined 74%.

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Source: SEC Filing

The company said:

Each prior cycle has lasted anywhere from two to four years and resulted in the crypto market capitalization significantly increasing compared to the preceding cycle. Each prior cycle brought in new market participants, developers, and products that further advanced the cryptoeconomy. These cycles are evident by viewing Bitcoin prices over time on a logarithmic scale. Prior peak-to-trough declines have been 84%, 85%, and 94% historically, although these prior declines did not coincide with a broader macro downturn.

In the shareholder letter, the company compared recent data to 2020, as it believes “the best way to evaluate Coinbase through these early years of this nascent industry, is through the same lens we evaluate crypto — over a price cycle.”

From 2020 to 2022, verified users have tripled, monthly volume is up 6x, and assets on the platform have increased 4x.

Coinbase stated that “down markets are not as bad as they may seem.” It continued, “it can feel scary and near-term financials can be heavily impacted,” but it will “emerge stronger than ever before.”

While the figures may appear bearish for the US-based exchange, many in the crypto industry would agree with Coinbase’s sentiment that “crypto markets are cyclical.” While several exchanges such as Celsius and Voyager have filed for Bankruptcy this quarter, Coinbase remains bullish on its future outlook.

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The company’s monthly transacting users (MTU) only dropped 2% versus Q1.

“Despite continued market softness, we were pleased to serve 9.0 million MTUs in Q2, a decrease of 0.2 million or 2% compared to Q1.”

Coinbase noted that Bitcoin trading volume and transactional revenue both rose 7% and 6%, respectively, in Q2 vs Q1. The total volume of retail transactions fell to $46 billion from $74 billion in Q1. Institutional trading volume also fell to $171 billion in Q2 from $235 in Q1.

Further, regarding institutional engagement, Coinbase notes,

“On the institutional side, with all of the market volatility it can be easy to lose sight that both new and existing clients continued to use our platform as they embrace crypto as a new asset class.”

Coinbase states that three themes underpin its decline in trading volume;

  1. Core U.S. retail customers were less active but have not left the platform
  2. A “large amount of trading volume” took place on off-shore exchanges that can list crypto derivatives with which Coinbase does not have “product parity with.”
  3. Coinbase did not have “exposure to the significant trading volumes related to the liquidation events of $LUNA.”

While Coinbase claimed it did not have significant exposure to $LUNA and that it was an “unsupported asset,” it did list the wrapped version of the token, wLUNA; something omitted from the Shareholder letter.

The exchange also noted that it did not have any counterparty exposure to Three Arrows Capital, Celsius, and Voyager.

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Adjusting to market conditions

Coinbase also said it taking steps to cut costs in the face of “challenging crypto market conditions.”

These steps include limiting its hiring for backfills and certain positions and cutting back on paid media and incentives. The company already reduced its workforce by 18% in June.

The company is also optimizing infrastructure and professional services expenses as well as investing in teams in lower-cost regions.

The company added:

“On the expense side, we are rigorously managing our expense levels and will continue to do so. On the product side, we are executing a ‘pause, maintain, and prioritize’ approach to ensure we are focused on the highest priority opportunities”

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