Good morning. Here’s what’s happening:
Prices: Bitcoin holds over $41,000, despite a slight weekend drop; ether and most other major cryptos follow a similar pattern.
Insights: The one-time, would-be “Apple of the Gaming World” failed in its attempt to secure a digital banking license and to reinvent itself.
Technician’s take: BTC’s four-month-long downtrend could be nearing an end.
A Slight Drop After a Good Week
Bitcoin and other major cryptocurrencies fell slightly but finished a largely upbeat week higher than when they started the week, withstanding the U.S. central bank’s first interest rate hike in four years and Russia’s escalating attacks on Ukraine.
The largest cryptocurrency by market capitalization was recently trading about $41,200, off about 1.3% over the past 24 hours. Bitcoin topped $42,000 late during U.S. trading hours Friday, a more than 7% increase from where it started the week as investors digested the long-expected Federal Reserve’s 25-basis-point increase on Wednesday and global unrest tied to Russia’s invasion. Ether, the second largest crypto by market cap, was changing hands a little under 2,900, a 1.8% drop over the same period, but well up from where it began the week. Most other major cryptos were in the red over the weekend. Trading volume fell over the past three days.
“It’s been a good week for Bitcoin,” Joe DiPasquale, the CEO of fund manager BitBull Capital, wrote to CoinDesk. “We have been holding support above $40,500. If we can break through the next resistance line at $42,500, we could see a breakout to $45,000 as we saw in the last day of February.”
DiPasquale added that “low trading volume is normal for weekend activity,” and he expected it to increase during the week. “With the equities markets rising again, there is a moment to be had in Bitcoin, Ethereum and other assets if Monday starts strong,” he said.
The tech-focused Nasdaq rose 2% on Friday, while the S&P 500 was up a little over 1%. Gold fell 1.2%. The upswing in stocks and cryptos late in the week suggested that investors were willing to embrace more risk than they had been just a few days before.
The weekend saw a new round of atrocities in Ukraine and continued fallout that could undermine the already jittery, global economy. According to one report Mariupol, a strategic Black Sea port that would help Russia control the southern Ukraine coastline, was days away from falling. Meanwhile, a Wall Street Journal story Sunday said that Russia has largely failed so far to demonstrate that its economy could thrive in the face of fierce sanctions from countries opposed to its unprovoked attack, and would take years to achieve this objective.
DiPasquale noted that many investors have associated February’s drop in equities and crypto markets with a similar decline in March 2020. “While there was a lot of uncertainty, the wrong thing to do then was to sell low; the next two years saw historic rises,” he said. “Hedge funds like ours have a generally optimistic sentiment given the market’s history of rising through uncertainty even after periods of turbulence.”
S&P 500: 4,463 +1.1%
DJIA: 34,754 +0.7%
Nasdaq: 13,893 +2%
Gold: $1,919 -1.2%
Razer’s Efforts to Diversify Into Payments Still Overshadowed by Its Hardware
Razer (RAZFF) used to talk a big game about itself. The Singapore-based manufacturer of gaming PCs and peripherals was once called “the Apple of the gaming world.”
Some lapped it up, but industry analysts snickered as channel data showed the company didn’t really ship many PCs. Its keyboards, mice and other accessories were well received, but the PCs not so much.
Then, after its initial public offering (IPO), Razer became more modest. As part of the IPO it had to list how much it actually sold of its products. The results were underwhelming. While its competitors shipped tens of millions of gaming PCs and notebooks, Razer could barely muster 600,000, according to analysts and others who reviewed its earnings. For some models, the shipments were under 1,000.
Razer’s bark was louder than its bite.
As a listed company it was harder to throw around monikers like “Apple of the Gaming World,” so Razer needed to pivot. In 2020, its CEO, Min-Liang Tan, said that Razer was a “lifestyle brand” and the company put a larger emphasis on alternatives to selling PCs.
The company settled on payments and fintech to diversify, applying for one of Singapore’s coveted digital banking licenses. But regulators in Singapore declined Razer’s application, limiting it to payments, a cut-throat industry with thin margins. Of course, Razer could apply for a license somewhere other than Singapore, such as Malaysia, but so far it hasn’t made a move.
In late 2021, Razer decided to shutter its Razer Pay wallet service because it couldn’t carve out a meaningful niche in Southeast Asia’s crowded payments marketplace, dominated by super app Grab.
Razer still has a foot in the payments game, but its most recent earnings show that its efforts to move the company away from hardware and peripherals has stalled. At the end of the last fiscal year software and services contributed 10.6% to the company’s revenue. While the division’s raw revenue is up, overall it actually accounts for less, coming in at 10%.
Total payment volume for Razer Gold, its virtual credits service used to monetize games, is up 56% year on year as the coronavirus pandemic continues to keep people inside and gaming. Razer’s fintech arm, which provides merchant services, hit $7 billion in revenue for 2021, up 63.5%.
Theoretically, GameFi would take a big bite out of Razer Gold as a way to monetize and finance games. When asked about this a PR rep directed CoinDesk to a statement in the earnings report from Razer’s CEO, which said the company intends to “explore decentralized finance” but otherwise said nothing concrete.
Shareholders don’t care. The stock is a catastrophe, especially in the pandemic era when investors put a premium on anything to do with gaming and PCs as locked-down consumers spend more in this segment as a way to entertain themselves and stay productive.
Since its listing in Hong Kong in 2017 the stock is down nearly 47%. This is incredible when compared to its peers. Logitech (LOGI), which makes PC peripherals for productivity and gaming, is up nearly 110% during the same time period; Taiwan’s MSI, a well-known gaming PC manufacturer; is up 90%; and Corsair (CRSR), which listed in late 2020, is up by around 40%.
Part of this might be because Razer is actually a fairly small company, despite its cult following. Net profits for the year were around $43.4 million. Last fiscal year it was a mere $800,000.
Razer’s future appears to be as a private company (there was talk about a U.S.-listing, but that would devolve into meme stock territory) as investors move towards de-listing it from the Hong Kong exchange through a buyout. That might be the best move because investors don’t seem to be too enthusiastic about Razer as a PC gaming company or even a payments company.
Still, there is significant overhead resistance on the charts, which could stall the current price bounce.
Ukraine legalized crypto as digital currency donations continued to pour in. Michael Chobanian of the Kuna exchange, who testified before the U.S. Senate Banking Committee on Thursday, joined “First Mover” to discuss the significance of the new law, crypto donations to Ukraine and more. Jason Grad, CEO and co-founder of Massive, offered additional viewpoints on the humanitarian crisis in Ukraine and how crypto can help. Plus, Hany Rashwan of 21Shares provided crypto market insights.
“Import substitution has failed to achieve its goal of making Russia less vulnerable to sanctions like these. The Russian ambitions were unrealistic to start with because a small economy like Russia’s isn’t able to produce complex and high-tech goods by itself. It’s just simply not possible.” (Janis Kluge, a specialist in the Russian economy at the German Institute for International and Security Affairs, to The Wall Street Journal) … Crypto threatens that power, even if the threat is somewhat distant for now. Mark Weisbrot, writing at the Center for Economic and Policy Research, describes the IMF as a “gatekeeper” for a “creditors’ cartel” of Western funders also including the World Bank and the Inter-American Development Bank. (CoinDesk columnist David Z. Morris)
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