Ethereum hits Record High, Tesla‘s Earnings Call, Tiger Global looking to outpace VC
Tesla’s First Quarter Results Suggest Market Share Gains This Year and Goes All In on Full Self Driving (FSD)
During Tesla’s first quarter earnings call last week, Tesla announced that the Model Y could become the best-selling vehicle globally based on revenue in 2022 and on units in 2023.
In 2019, Toyota sold 1.5 million units of the Toyota Corolla the best selling car globally, which is three times the number of all Tesla vehicle sold last year. Although the Model Y is two times more expensive as the Corolla, Tesla is forecasting a sale of at least 750,000 units in 2020 and 1.5 million units in 2023 which is 10x the amount of units sold in 2020, or 86,000 units.
Recently, global semiconductor shortage is crippling the production from mobile phone manufacturers like Samsung to Ford. Although Tesla did not change its guidance for the year despite a global semiconductor shortage that is impacting nearly every automaker. Ford, is losing half of its planned Q2 production because of this shortage. However, Tesla seems to be navigating the shortage effectively thanks to its vertical integration and rapid work-around strategies. Specifically, it has pivoted to firmware for microcontrollers made by new suppliers. As a result, we believe Tesla could increase its market share significantly this year.
Tesla’s decision to move away from LiDAR to its Full Self Driving (FSD) beta Autopilot software is proving that Tesla could have a best-in-class vision system . Echoing the reason that Tesla decided not to incorporate LiDAR initially, Elon Musk explained that fusing camera and radar signals adds unnecessary complications given the precision of cameras.
According to Boston Consulting Group (BCG), the market for autonomous vehicles will grow to $42 billion by 2025. Most other autonomous driving projects seem committed to sensor fusion techniques incorporating both LiDAR and radar.
Instead of using LiDAR, Tesla's system, known as Autopilot FSD (Full Self-Driving), by contrast, lets car hit the road first and then figure out what to do at any moment based on a 360-degree view of road conditions captured by eight in-car cameras through machine learning algorithms.
“I’m extremely confident that Level 5 or essentially complete autonomy will happen, and I think will happen very quickly,” Tesla CEO Elon Musk said at the virtual World AI Conference 2020 in July. “There are many small problems…[but] I think there are no fundamental challenges remaining for Level 5 autonomy.
Currently, Tesla’s FSD version still requires an attentive driver behind the wheel at all times. Tesla’s goal is to roll out level 5 autonomy, the highest level of vehicle automation that doesn’t require any human engagement, in 2021.
Singular believes that Tesla’s reason of not using LiDAR and radar is because it could delay the early days of local autonomous driving platforms, one reason that Waymo has been the first company to commercialize autonomous driving in a few cities.
2. Ethereum Hits New All Time High
Yesterday, Ethereum breached all time high at $3,400, pushing the second largest cryptocurrency's market cap to more than $320 billion with more than 300% rally this year. Leading crypto-commentator Mark Cuban compares today’s blockchain to “the early days of the Internet.”
In Singular’s view, ether’s price has broken out for a number of reasons, among them the following:
Strong and Rising Institutional Interest
This week, Canadian digital asset manager 3iQ Corp and investment firm CoinShares has launched four new Ether ETFs, now trading on the Toronto Stock Exchange (TSX). This allows institutions to easily trade and invest as demand for crypto exposure increases beyond bitcoin. Also, companies like European Investment Bank and Visa, which is backing Singular have validated Ethereum blockchain by announcing issuance and settlement use cases, respectively.
During the last two weeks Four Ether ETFs launched on the Toronto Stock Exchange, making it easy for institutions to gain access as demand for crypto exposure broadens beyond bitcoin. In addition, institutions and companies like the European Investment Bank and Visa have validated the Ethereum blockchain by announcing issuance and settlement use cases, respectively.
Strong On-Chain Signals:
Usage of the Ethereum network is increasing and, by some measures, outpacing that of Bitcoin, as shown below by the number of active wallets and total transaction fees. In our view, Decentralized Finance (DeFi) and Non-fungible tokens (NFTs), both of which are burgeoning, explain Ethereum’s recent breakout.
Imminent Protocol Upgrades:
Ethereum historically priced transaction fees using a simple auction mechanism, where users send transactions with bids ("gasprices") and miners choose transactions with the highest bids, and transactions that get included pay the bid that they specify. This leads to several large sources of inefficiency:
Slated to go live in July, Ethereum Improvement Proposal (EIP) 1559 will change Ethereum's transaction fee model significantly. Aiming to lower the volatility of Ethereum’s fees, EIP-1559 introduces a mechanism to burn some transaction fees, detracting from circulating supply and introducing deflation to the Ethereum ecosystem. The impact on ether’s price could be like that associated with a Bitcoin halving event.
Notable are the risks associated with these positive developments. DeFi applications frequently involve significant leverage which, given interoperability within the Ethereum blockchain, might compound the leverage associated with other products. In the event of a downward spiral in ether’s price, the losses associated with deleveraging could be significant.
Additionally, EIP-1559 could become a contentious upgrade, as miners will bear the brunt of fees burned. A miner revolt could impede the progress of the EIP-1559 upgrade.
3. Venture Capital hits $130 billion globally during 1st Quarter 2021
Early this year, Venture Capital (VC) investements has hit nearly $130 billion globally, based on figures published by KMPG and PitchBook. As companies and investors doubled down on VC opportunities, follow-on investments accounted for 93% of the total invested, also a record high.
While VC activity has been increasing rapidly in recent years, the COVID-19 pandemic seems to have accelerated the pace thanks to the proliferation of technologies that private companies have developed to solve problems created by the coronavirus. Adding to the boom have been record low interest rates and the staggering returns that some VC firms have enjoyed as their companies have gone public during the last 12 months.
As a result, the competition in venture capital has intensified. In late-stage VC, median deal sizes and pre-money valuations roughly doubled on a year-over-year basis last quarter.
According to data by CrunchBase, VC deals often does its research on private companies before meeting them, and writes checks in days or hours instead of weeks to outbid competitors. With the increased hedge funds interest in the VC industry and other public-private investors, those historically investing in public markets are now looking to also invest in private companies which is now about 36% of all US VC deals, or 400% more than investments in 2018. For instance, one of the largest hedge funds Tiger Global is looking to compete with large venture capital funds like Accel and Andreessen Horowitz
Some analysts attribute the explosive growth in VC to hedge funds and other public-private investors. In 2020, crossover investors - those historically focused solely on public markets but now investing also in private companies - participated in 36% of US VC deals, nearly four times the ~10% in 2018. For example, hedge fund Tiger Global just raised $6.65 Billion to outpacing the cadence of large venture capital funds like Andreessen Horowitz and Accel, according to CrunchBase data, because it often does its research on private companies before meeting them, makes decisions in days or hours instead of weeks, and typically outbids competitors.