We’re all dying. Not a thought you might want to start your morning cup of coffee with, but it doesn’t make it less true.

But we’re not all dying at the same rate. Your Aunt Linda, the one who chain smokes and has a sky-diving hobby, probably isn’t going to live as long as Jonathan the tortoise, who capped out at 190 years.

But on a scale from your Aunt Linda to a tortoise, crypto firms may be in freefall without a parachute.

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Espresso Shots

☕️ Crypto Closures 🪙 ❌

Yes, something’s very wrong with crypto funds, as Bloomberg reported 97 crypto funds have closed this year, citing data from Switzerland-based investments advisor 21e6 Capital AG.

That number accounts for 13% of the total 700 tracked crypto firms.

"Directional funds performed well, but underperformed Bitcoin," said Maximillian Bruckner in a blog post about the 21e6 data. Many funds were seriously outperformed by Bitcoin’s 83.3% gains this year.

"While many funds had to slow down their operations due to regulatory uncertainties surrounding popular banking partners and fund administrators, discretionary crypto funds did not face this issue." Bruckner continued.

And you better believe we’ll have more on those regulatory uncertainties in today’s deep dive.

The closing of 97 crypto firms is a shame. But it’s a bigger shame because if 100 crypto firms close, the next one is free.

☕️ Thief Throws Curve Some Relief ➰ 🦝

After the decentralized exchange Curve Finance suffered a $61-million hack of digital assets, it posted a bounty offering 10% of the hack in exchange for its stolen assets.

But it looks like the anonymous thief is willing to play ball with Curve. After speaking with one of the victims online last Friday, the hacker returned roughly $10 million ETH.

The hacker’s actions raised hope for more returns and restored hope in Curve, the exchange’s native token (CRV), which jumped 5% in the 24 hours after the hacker’s return went public.

But because the hacker has so far only returned $10 million of the $61 million, we’re only comfortable calling them “somewhat” of a hero.

☕️ Keeping AI out of the Dungeon 🤖 💀

Wizards of the Coast, the publisher behind Dungeon and Dragons, has moved to tighten its artist guidelines after discovering one of its artists used artificial intelligence (AI) to create imagery for one of the upcoming D&D books.

Wizards of the Coast said on X (Twitter) that they reached out to Ilya Shkipin, the artist in question, and no AI generated will be used by him or any D&D collaborators in the future.

This isn’t the first time Wizards has made headlines for its strict guidelines. It also made waves in crypto when the firm waffled on its draconian NFT ban.

But AI in a fantasy setting? That’s just muddy genre-blending unless, of course, the AI is a rock golem, or powered by steam.

Spilling the Beans

Are Crypto Firms Dying? 📉 👀

Usually, scientists can point to one or two key factors when assessing why a species is failing.

Why are pandas endangered? Their over-dependence on bamboo.

Coral reefs are being bleached by rising ocean temperatures.

The Black Rhino is now extinct because it didn’t have what it takes to thrive in Africa’s fast-paced work environment.

But when it comes to the crypto exchange, there’s no simple or single explanation for why this species is dying out. There are several.

And you better believe we’re gonna walk you through ‘em.

But first, we need to step outside ourselves a little and examine this problem sans metaphor.

When we say “dying,” we mean failing. And by “failing” we mean losing money. Because crypto exchanges are in rough shape, and the numbers don’t lie.

Crypto investments are down for the fifth quarter in a row. Last year, crypto investments commanded a whopping $8 billion from venture capitalist firms. Now, VC contributions to crypto are down to a mere $2.3 billion in the second quarter of 2023.

And there are many reasons for that. In 2022, crypto exchanges underwent some massive, public failures. Naturally, FTX was the loudest example, but that’s not some dark chapter that crypto has entirely moved past.

Things with Binance.us look pretty bad, and that was just this summer. It’s fairly reasonable to surmise that investors may just be burned out on crypto’s failures. The misappropriation of customers’ funds has stopped looking like a couple of coincidences and more like a trend.

And even without the residual mistrust of crypto exchanges, AI has stolen the spotlight as 2023’s go-to destination for VC investments.

Crypto exchanges need the support of VC firms. As a young industry, crypto thrives on startup money.

But the problems don’t stop there. On a macro level, rising inflation has money tight across all sectors, particularly tech.

So, if we’re being generous, the trouble hitting crypto exchanges might not be their fault at all — but part of a macro-economic trend.

But even accounting for layoffs mounting across every industry, crypto still seems to be getting hit especially hard, with thousands laid off from several major exchanges in the first half of 2023.

But what does this mean for you and me? Simple. Crypto is stuck in a holding pattern.

The future is uncertain, and we’re all tapping our feet in the waiting room. But we know that crypto is strong. Crypto’s a fighter.

The exchanges on the other hand… it seems time after time when these exchanges run afoul of the law, we’re left waiting for the next exposé detailing a cocktail of human greed and error.

Crypto exchanges will have to do better, for years, if they want to earn back investors’ trust.

They’ll also have to overcome the obstacle of making their business look more appealing and innovative than whatever’s happening with AI.

But if your favorite crypto exchange looks like it’s about to die out, remember, you can always adopt it using the World Wildlife Foundation website.

They’ll even send you pictures every month of the programmers and UX designers you’re helping to clothe, feed, and afford tickets to anime conventions.

Premium Market Report

Spot

Top 10 Cryptocurrencies (Excluding Stablecoins)

☕️ Our Take:

Meme of the Day

Those poor, VC-neglected crypto exchanges. Just look how sad he looks. 💔

Crypto 101

Distributed Ledger: Remember, a blockchain is just a type of distributed ledger.

A distributed ledger is any database that existed across several locations, and can be accessed by multiple users.

A centralized database, on the other hand, only exists in one place — and therefore has a single point of failure.

Many points of failure are the way to go.

The Last Sip

If you’re going to adopt a crypto exchange, your charitable gift will go to a crypto firm sanctuary that ensures the survival of the species. Here are the levels of giving:

Bronze Tier: You’ll receive photos every month of your adopted crypto firm. You can sleep well knowing that your dollars are putting food in the exchange’s mouth and providing enrichment toys for its enclosure.

Silver Tier: You can visit a private reserve where you can hunt and kill crypto exchanges at your leisure. Though it does cost extra to have them mounted as trophies.

Gold Tier: You are airdropped into the Alaskan wilderness, naked. Where a feral crypto exchange will hunt you.

Stay Caffeinated,

Coffee & Crypto Team

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.