Crypto Week: Funds Eye Up AI

Bitcoin prices are trying to hold above $22,000 per coin, but it will be hard to do in the absence of any positive drivers. Genesis filing for bankruptcy has led to losses of venture funds like Gemini that lost $765 million, Mirana that made a loss of$151 million, and other crypto projects like Decentraland that reached a loss of $55 million. The Crypto market continues to suffer from bankruptcies and may do so for a long time before the Federal Reserve (Fed) moves towards a softer monetary policy.

However, even in such complicated environments, investments into crypto project continue. a16z Fund invested $32 million in Plai on behalf of MySpace founders. There is no detailed information on the project besides that it is going to be focused on social media and built on web3 and artificial intelligence technologies. Project teams have previously developed AI products for Champions Ascension. a16z investments may become a beacon for others as the fund successfully invested in the tokens of the play-to-earn project two years ago. Its strategy of investment in AI is well in line with market expectations that AI will become the next growth driver for the crypto market.

The current rally in the crypto market emerged only after the stock market in the United States surged amid elevated investors’ expectations over a possible swift inflation slow down below 2% that will push the Fed to lower its interest rates. But there is no solid evidence that the Fed will do this. This scenario of a swift inflation slowdown is based on a possible wide scale financial crisis, similar to the one in 2008-2009. If this is not the case,  the Fed is expected to keep its interest rates at high levels like in 1970s when the rates hit 20%. Both suggestions are unlikely to become a reality now as a strong labour market in the United States lower the chances for a recession while prudent Fed actions should not lead to such high interest rate levels. Reopening of the Chinese economy and the improving economic situation in Europe is also thought to support the American economy.

However, if investors are not convinced that prices in the U.S. are slowing down as rapidly as they were in late 2022 and as it is expected, then many assets like stocks and cryptocurrencies, and the Euro will suffer. That is why the resistance at $23,000 for Bitcoin may become a formidable obstacle. For a short time, prices may go over this level but it could turn out to be a trap for most impatient bulls. After this short spike, prices are likely to return to $20,000 and continue down towards $16,000.