welcome back chain reaction.
Last week, we took a look at Solana’s smartphone and post-Apple tech industry. This week, we’re looking at web3 without Big Tech.
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Billionaires not allowed
Unlike other moonshot tech categories, it’s increasingly clear that Big Tech doesn’t have a huge white space when it comes to defining the future of cryptocurrencies.
This week, Meta announced that it will be shutting down its Novi crypto payments wallet in September. The pilot, which is only available in a few regions, is almost the last hurrah for the company’s ambitious Diem stablecoin plans and leaves the company with no clear path forward to expand the cryptocurrency game beyond its current network.
This failure comes as no surprise, Meta has been a punching bag for regulators over the years and played the most active role in undermining their crypto ambitions – culminating in a sell-off of their Diem assets and an exodus of top talent. Meta is not alone , despite ideal positioning, many of the largest tech companies with market caps above $1 trillion (or at least those a few months ago) have not ventured into the blockchain space. For some companies this may be ideological, but for others it is clear that the regulatory risk is too great to jeopardize other revenue streams.
Comparing cryptocurrencies to another moonshot like AR/VR, it’s clear that governments generally don’t know how to regulate internet-native social networking companies, but they know very well that they’re doing the right thing when they put financial tools and vehicles into them barrel. The absence of this diversified technical market support means the lows may continue to fall as crypto hopes pinned on web3’s ambitions. AR/VR has been in a dry spell for years, but Meta has been navigating the industry’s dry spell without a clear focus on current revenue, and it’s not that GAFAM is going to abandon its web3 investment anytime soon.
While most in the crypto industry won’t cry that Meta is not included in the crypto core toolkit, relying on the good fortune of financial firms that buy crypto outright is why the current crypto consolidation looks so chaotic. For the crypto industry , which could be a very disturbing year or more, and the abyss funding of top tech companies isn’t going to make their lives any easier.
While I was away last week, you got a letter from our talented colleagues Jacqui Melink. Well, she’s back! Shout out to Jacquie, who unraveled some incredibly juicy but complicated topics for me when Lucas was sick this week, including how all the roads in the DeFi downturn seem to be back to the same hedge fund.
Join us as this week’s guest of One of the most memorable founders I’ve ever met – Tux Pacific by crypto custody startup Entropy. Pacific, a transgender anarchist cryptographer, raised $25 million in seed funding last month from a16z and other venture capital firms. They joined us to discuss what it’s like to raise venture capital as an anti-capitalist, and what they think is wrong with the typical way digital currencies are stored.
follow the money
The direction of the flow of startup funds in the crypto world:
- Echo 3D Raised $5.5 million for cloud storage and AR/VR streaming in a round led by Qualcomm Ventures.
- Web3 extension protocol replacement layer Completed a $7.2 million seed round with Polychain as the lead investor.
- Crypto Gaming Company kettle Raised $6.6 million led by Cherry Ventures to build the “Pixar of web3.”
- Binance Labs leads $3M seed round Rubik’s cubea crypto app store.
- DeFi platform Incremental Lab Received $1 million in seed funding led by Dapper Labs.
- Crypto Tax Platform KoinX $1.5 million from angel investors including Polygon’s Sandeep Nailwal.
- A second-layer blockchain focused on gaming oasis Raised $20 million through a private token sale to investors including Republic Capital and Crypto.com.
- dimension Xa money-making gaming company, has raised $3 million in a round led by Coatue.
- klang games Received a $41 million Seed virtual world led by Animoca Brands and Kingsway Capital.
- Metaverse Startup Singapore Enjin Launcher $5 million from True Global Ventures.
this week at web3
Here comes Anita, who just returned from a week away from the office, during which time I have had some time to reflect on the strange cognitive dissonance that seems to be unfolding in web3. Valuations look miserable, with cryptocurrency lenders declaring bankruptcy almost every day, and the industry as a whole is now worth a third of what it was at its peak last year. but, As Washington Post columnist Sebastian Malaby pointed outthe same financial fate has befell many other technologies that have continued to change the world ever since.
Obviously, the jury is still out on what this downturn will actually mean for cryptocurrencies, but when I look back at the industry’s recent rapid rise and fall, one thing is clear to me. We haven’t actually “seen it before”, as many investors and ecosystem players would have you believe. Two major things have changed from past crypto downturns, both stemming from the fact that crypto has gone from a niche hobby for eccentric people to a mainstream, normal dinner table talk.
First, crypto companies are now more interconnected than ever, similar to traditional finance in 2008. Sam Bankman-Fried is the new Jamie Dimon, bailing out other companies left and right. Crypto lender Celsius stopped withdrawals last month in what could well be a Lehman moment for the industry. I can’t say I’m completely surprised by the cryptocurrency market’s sobriety, but there are striking parallels between tradfi’s most famous crisis and cryptocurrency’s current disaster. Even if the underlying technology is still around, it’s still a defining disaster for the industry — don’t forget that despite the carnage of 2008, mortgage-backed securities and CLOs still exist.
The second big difference I’ve seen between this crypto downturn and past instances of this kind is that cryptocurrencies aren’t so outlandish anymore. Its mainstream journey brought a lot of groupthink, as evidenced by the clichéd, jargon-like phrases we now hear over and over again.
They say we’ve seen it “before” and that the crash was a “black swan event” but don’t worry, “it’s early days”. As long as the founders persevere, the cryptocurrency will eventually achieve “mass adoption” and “the next billion users” because “the best time to build is during a downturn.”
I’m not saying I’m a crypto OG. In fact, I only started paying close attention to it during those dreary lockdown days when a lot of people were doing the same thing. But I often remember being much younger, listening with curiosity and curiosity to one of my authority and math-averse relatives explaining to me why blockchain could change the world. It makes me kind of miss cryptocurrency being a space full of contrarians, outcasts, and truly independent thinkers. To me, this is the most interesting thing in this space, so I say: let’s keep cryptocurrency weird.
Here’s some crypto analysis from this week, which you can read on our subscription service TC+ (written by TC’s Jacquelyn Melinek):
Cryptocurrency losses hit $670 million in Q2, up 52% year over year
The second quarter of 2022 is a turbulent period of what I like to call market madness, and the evidence for the crypto market keeps piling up. According to a new report, the web3 ecosystem was filled with massive crypto “losses” in the second quarter, about 97% of which were the result of hacking.
Crypto trading volumes drop in India as additional taxes hit investors
The Indian government on July 1 implemented a 1% tax deduction at source (TDS) for every cryptocurrency transaction over INR 10,000 (~$127). The law has only been in place for a few days, but it is already having a chilling effect on the Indian digital asset market. Increasing taxes could also be a further hurdle for citizens seeking to trade cryptocurrencies as economic gains dwindle.
FTX policy exec says its ‘priorities haven’t changed’ amid market frenzy
As the cryptocurrency market continues its downward trend, FTX, the world’s second largest cryptocurrency exchange, remains undeterred. “Our priorities haven’t changed,” Mark Wetjen, FTX’s head of policy and regulatory strategy, told TechCrunch. “The market will do what they have to do, but the reality is that we believe that the digital asset market and digital asset ecosystem will continue to exist.”
The SEC has once again rejected a Bitcoin spot ETF. How to do?
The U.S. Securities and Exchange Commission rejected Bitwise Asset Management and Grayscale Investments’ bitcoin spot ETF applications. Shortly thereafter, Grayscale, one of the largest digital asset managers with about $20 billion in assets under management, filed a lawsuit with the U.S. Securities and Exchange Commission. But not everyone believes the lawsuit will work in their favor…
Valkyrie CEO Says Suing SEC Over Spot Bitcoin ETF Is ‘Unlikely to Succeed’
“The SEC’s rejection of Bitwise and Grayscale’s GBTC Spot Bitcoin ETF application is not surprising, as it follows the same precedent experienced by other asset managers,” Valkyrie Investments CEO Leah Wald said in a Twitter post. “It’s unlikely to be successful in suing the SEC.” Ryan Shea, a crypto-economist at Trakx, said the SEC made clear in its response that it believes underlying holdings in futures and spot are fundamentally different, especially because the former is subject to Trade on regulated markets, and the latter trade on unregulated markets. technological crisis.
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Lucas and Anita