Casey Wagner

<div id="highlights-block_621fd2d01a223" class="highlights">
 <ul>
 <li>The intensifying conflict between Russia and Ukraine has highlighted the use case around cybersecurity and Web3, industry experts say</li>
 <li>Venture capitalists are going to want in on the growing space, analysts say</li>
 </ul>
 
</div>



Increasing concern over the escalating conflict in Ukraine is likely to lead to a renewed push into decentralized finance and Web3 investments, experts say.



While crypto has always faced criticism for its bad actors, according to Jessica Rabe, co-founder of DataTrek Research, digital assets are still a necessary “decentralized way to store and transfer capital.”



“There are too many positive and lucrative opportunities with the blockchain and Web3 that venture capitalists will want to keep trying to capitalize on,” Rabe said.



Venture capital investments into blockchain startups have hit $3.8 billion so far in 2022, on pace to surpass 2021’s total of $17.9 billion, according to Crunchbase data. Crypto startups received $2.1 billion in 2020 and $2.9 billion in 2019.



“We expect VCs to keep putting money to work in the blockchain and Web3 amid the push to a decentralized internet and finance,” Rabe said. “Big Tech companies dominate today’s internet, so Web3 offers the opportunity to develop the next major online platforms and apps to drive engagement and therefore profits.”



The war in Ukraine <a href="https://cms.blockworks.co/crypto-exchanges-weigh-blocking-russian-accounts-as-sanctions-intensify/" target="_blank" rel="noreferrer noopener">underscores the need</a> for decentralized solutions, according to Hunter Horsley, CEO of crypto asset manager Bitwise.



“As it pertains to Web3, I think [the conflict] is absolutely galvanizing entrepreneurs to work on building the decentralized, permissionless systems of the future,” Horsley said. “I think you&#8217;ll see more projects and likely investments in identity and media and nonprofit fundraising and DAOs, and a renewed conviction in the importance of the existing platforms like Bitcoin, Ethereum and layer-1s and DeFi.”



Cybersecurity in particular is expected to see major growth, Rabe said, “especially with hacks and cyber threats stemming from the Russia and Ukraine conflict shining a light on its importance.”



The three largest cybersecurity-focused ETFs have all increased in assets under management by more than 9% over the past five days. The <a href="https://finance.yahoo.com/quote/BUG/" target="_blank" rel="noreferrer noopener">Global X Cybersecurity ETF</a> is up 11.4%.



“VCs putting more money to work in cybersecurity is positive for investors in public markets, who have taken notable interest in the space since Russia invaded Ukraine,” Rabe said.



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Ukraine Crisis Primes Crypto, Cybersecurity for Venture Funding Boost, Experts Say

<div id="highlights-block_6217ed102d12c" class="highlights">
 <ul>
 <li>Economists warn 2022 will not see the same economic growth as 2021</li>
 <li>US GDP increased at a 7% annualized rate in the fourth quarter</li>
 </ul>
 
</div>



Though the US economy grew slightly faster in 2021 than previously estimated, the surge has not spilled over into 2022 as risk assets, including cryptocurrencies, have faltered.



The uncertainty, coupled with rising concerns over <a href="https://cms.blockworks.co/bitcoins-plunge-on-ukraine-invasion-undermines-status-as-digital-gold/" target="_blank" rel="noreferrer noopener">conflict in Eastern Europe</a>, has sent risk assets into a spiral.



“As far as the dollar goes, it is showing itself as the safe haven that it is,” Steve Van Metre, founder of Steve Van Metre Financial, said. “Whereas bitcoin is not a safe haven, which is why it is showing signs of weakness against the dollar and is likely to decline further should the dollar continue to rally.”



<a href="https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-second-estimate" target="_blank" rel="noreferrer noopener">Updated figures</a> released Thursday show US gross domestic product increased at a 7% annualized rate during the last quarter of 2021, a slight increase from the 6.9% annualized rate reported in January.



“The GDP numbers are the second revision and reflect massive amounts of fiscal and monetary stimulus,” Van Metre said. “What matters now is going forward.”



The Atlanta Federal Reserve’s <a href="https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-second-estimate" target="_blank" rel="noreferrer noopener">GDPNow</a> model, an algorithmic assessment of domestic growth based on economic reports, predicts the economy will grow 1.3% this quarter. Human economists have a rosier outlook, calling for a 2% bump.



While growth may be on the rise, inflation persists. The consumer price index rose <a href="https://cms.blockworks.co/market-recap-inflation-keeps-rising-stocks-and-cryptos-slide/" target="_blank" rel="noreferrer noopener">0.6% in January</a>, bumping the year-over-year figure to 7.5% — the quickest rise in four decades. It could mark a sign of a pending economic slowdown, some analysts say.



“There have been eight recessions in the United States over the last 60 years, and in every case, inflation declined noticeably,” said Nicholas Colas, co-founder of DataTrek Research. “US inflation has never declined from +5 percent back to the Fed’s target of 2 percent without a recession. Since CPI inflation is currently 7.5 percent, that’s an important, if unwelcomed, fact.”



Deflationary periods typically occur in tandem with sudden drops in energy prices, though that’s not happening now, Colas added.



​​”We are sure every Fed economist and [Federal Open Market Committee] member, including Chair Powell, knows this historical relationship between recessions and inflation,” Colas said. “They would very much like to avoid the former even as they bring the latter under control. The trouble is there is no playbook for that outcome.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.