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Amazon enters the NFT space, Silicon Valley Bank collapses, and GPT-4 to be released this week. Newsletter #14
Amazon Enters the NFT Space
Silicon Valley Bank Collapse
GPT-4 Coming This Week
Interest Rates Might Remain High
Amazon Enters the NFT Space
Rumours have surfaced that Amazon plans to launch an NFT marketplace in April - the catch is that it’ll only accept debit/credit cards, but ironically, not crypto.
The project was first reported on by Blockworks in January. According to, TheBigWhale, a crypto-media company, the platform will feature 15 NFT collections and launch on April 24 in the US, but will eventually be available worldwide.
Amazon’s entry into the Web3 space would arguably mark the largest validation of crypto by a major company in its history and would act as a major ramp for onboarding more users into the Web3 space. Users who don’t have access to a crypto wallet will be able to buy NFTs without having to purchase cryptocurrency.
Amazon has over 310 million users worldwide, if just 1% of them begin using the new marketplace, that’ll be 3.1 million people, a significant boost to the nascent Web3 space.
The company will reportedly produce physical goods tied to many of the NFTs that customers can receive delivered to their doorstep. The report from Blockworks said shoppers will be able to buy a “fashion-oriented NFT tied to a pair of jeans.”
It seems a shame Amazon won’t be supporting crypto payments or wallets in the near future but perhaps that’s part of the longer-term vision for the project. Regardless, it’s great to see larger companies embracing Web3 technology and hopefully accelerating innovation in the growing industry. Although I’m not exactly sure how big the demand for “fashion-oriented NFTs” is amongst buyers on Amazon.
Silicon Valley Bank Taken Over
Silicon Valley Bank (SVB), a bank that was the 16th largest in the US has been closed down and taken over by the Federal Deposit Insurance Corporation (FDIC). The FDIC normally guarantees bank deposits of up to $250,000 and said last week that insured depositors would have access to their funds by today.
The takeover marks the second-largest bank failure in US history after the collapse of Washington Mutual in 2008.
SVB’s share price fell 60% last Thursday after it announced it would need to raise capital to shore up its balance sheet. After the markets closed, the stock slid another 26%, and on Friday, the FDIC shut down the bank.
The last US bank collapsed 865 days ago, so the collapse of SVB marks the second-longest period without a US bank collapse in history. The record was 951 days from June 2004 - February 2007 - perhaps an ominous sign of what’s to come. Although this seems different.
Most reports say unlike 2008, it’s less likely that this poses a risk to the financial system as a whole but it’s certainly a serious problem for many of the tech companies who held funds in the bank and their depositors. And that’s not to say it poses zero risk to the larger financial system.
Late last night, regulators closed New York’s Signature Bank citing systematic risk. All depositors will get their money back, but equity and bondholders at both banks will lose everything.
According to most outlets, firms could start to run into problems today if nothing is done. Politicians in the UK are still trying to find ways to help the tech industry and make sure the affected companies can meet their cash flow requirements.
Janet Yellen, US treasury secretary, said yesterday that there would be no bailout for SVB but that the Biden administration is working to help depositors affected by its collapse. Referring to the collapse she said:
“The American banking system is really safe and well-capitalised, it’s resilient. Americans can have confidence in the safety and soundness of our banking system.
Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out … and the reforms that have been put in place means we are not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”
We’ll have to wait and see exactly how this plays out, but thankfully, it doesn’t seem that this is the start of a crisis anywhere near the scale of the 2008/9 crash. It’s more likely that it will primarily affect tech companies that held their money in the bank. But that doesn’t necessarily mean it won’t impact the global economy and how it might impact startups around the world remains to be seen.
CTO of Microsoft Germany, Andreas Braun, announced that GPT-4 will be released this week, saying:
“We will present GPT-4 next week, we will have multimodal models that will offer completely different service possibilities, for example, videos.”
Here’s a great in-depth breakdown of the improvements made in GPT-4 written 3 weeks ago.
To summarize, GPT-3 had 175 billion parameters (a variable adjusted during training to modify how input data is transformed into an output), GPT-4 will have 1.6 trillion and has been trained on a larger data set than its predecessor (45GB for GPT-4 vs 17GB for GPT-3). It’s also faster and uses better algorithms to improve the accuracy of its results.
GPT-3 was released by OpenAI in May 2020 and is the foundation upon which ChatGPT is built. GPT-3 however, could only operate in one modality, text. GPT-4 will reportedly be able to create at least four types of output - image, sound, text, and video.
It’s not exactly clear how this will work yet, but I imagine it might be something similar to ChatGPT where you can input a description of what you want, and get back a video or music based on the input.
OpenAI CEO, Sam Altman, has downplayed the hype surrounding the product, but after the impact ChatGPT has had in the past four months, it’s difficult not to be excited by the release.
“People are begging to be disappointed and they will be” - OpenAI CEO, Sam Altman
It’s important to note that GPT-4 is the next generation in OpenAI’s GPT language model, not an upgrade to ChatGPT, which is a variant of the GPT-3 technology specialized for chatbot-like applications. So although GPT-4 is a huge upgrade to GPT-3, this doesn’t mean that ChatGPT is going to improve, just that new applications can be built using the GHT-4.
We’ll likely have to wait a few more days to see exactly how it works, but hopefully, it’ll be as impactful and as useful as ChatGPT has been. It’s likely to be unveiled at Microsoft’s “The Future of Work with AI” event scheduled on March 16.
Will Interest Rates Remain Higher than Expected?
The Federal Reserve faces the possibility of having to switch back to interest rate increases of 0.5%.
Chairman of the Fed, Jerome Powell, warned the bank might have to raise rates by 0.5% at its next meeting on March 22 to try and keep inflation under control. The final decision hinges on data that is set to be released between now and then. The two big ones being the jobs report on Friday and fresh consumer price data on tomorrow.
The statement spooked investors who were banking on interest rates steadily falling throughout the year. A rise of 0.5% would mean the Fed would have to make a significant departure from the path it laid out just over a month ago, when the central bank announced an end to the string of “jumbo” rate rises and opted for the normal 0.25% raise.
Derek Tang, an economist at the research firm LH Meyer told the Financial Times:
“It’s [the Fed’s] reputation at stake now and reputation is something that’s very hard to earn back once you lose it”
Powell had indicated that the "disinflationary process" was underway at the Fed's last meeting, which led to a market rally and gave the impression that the US central bank had made significant strides in its efforts to curb rising prices.
However, the situation has since become more complex due to a surge in job creation and unexpectedly high inflation and spending data, making it more difficult for the Fed to make informed decisions.
The possibility of a 0.5% increase in interest rates has upended predictions about how much the Fed will increase its benchmark rate this year. Currently, the rate stands just below 4.75%, and Powell has suggested that the final level of interest rates will be higher than previously expected.
In December, most officials predicted that the fed funds rate would reach 5%- 5.25%. However, new projections will be released this month in conjunction with the rate decision, and many economists now anticipate these forecasts will be revised upwards by at least 0.5%, to 5.5%-5.75%.
Ethan Harris, head of global economics research at Bank of America, has stated that the economy would need to shift significantly in order for Powell to stop increasing interest rates. He suggested that this would require a dramatic decrease in job growth, down to zero, and an increase in the unemployment rate.
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