Hello everyone and welcome to chain reaction
In our Chain Reaction podcast this week, Anita and I chatted with Kevin Rose of True Ventures and Proof Collective about the latest crypto crash and what the future of NFTs looks like in a bear market. More details below.
Last week we talked about regulators’ efforts to detect crypto crime. This week the markets crashed and a new breed of crypto startups is likely to find out that you can’t pay for loyalty.
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the hottest plug
This week has been a doozy for crypto investors, there is no other way to say it. But it was a different kind of doozy than the crashes that preceded it.
For a quick recap this week, hundreds of billions worth of value were wiped from the global crypto market capitalization as major coins like Ethereum and Bitcoin saw major declines while other blockchain networks essentially imploded. Hundreds of thousands of crypto investors have been liquidated on trades as tokens crashed indiscriminately across the board, while the Terra stablecoin fiasco — about which my colleague Jacquie has plenty of details here — appears to be tens of billions of crypto wealth in a day or two.
To longtime crypto traders, the wild downward pressure in the markets may seem old-fashioned, but the amount of money lost and the number of people losing money is an order of magnitude more important than ever because the crypto markets have grown so dramatically during these bull runs. If crypto markets continue to go to hell in a pushcart, there will be a lot of lasting damage when it comes to consumer onboarding as Web3’s paid acquisition budget runs out with reduced volumes.
After several years of retail investors Robinhood and r/wallstreetbets playing public stocks, consumers were ready for crypto and the industry welcomed them with open arms. For the past two years, venture capitalists have been betting on consumer-facing crypto verticals, gamifying the investment with real games with tokens and NFT integrations. All the while, web3 supporters have touted “community” as one of the key features of crypto platforms, explaining that users will give a financial stake in the platform in order to take action. gospel accordingly.
This all went pretty well during the “up-only” era of this crypto bull run, but now comes the interesting part.
Giving users financial incentives to take advantage of your product works well enough if those financial incentives exist, but things look a little different when the space is taken down and users are left with the bare platform and no interest. Play-to-Earn game companies have raised billions for games that are only fun when you get rich and otherwise terrible. NFT projects have also led users to adopt collectible card-like mechanisms that are only fun when the money is pouring in. Meanwhile, VCs have funded Web3 media companies, publications and social media companies that all rely too heavily on crypto speculation while shipping generally bad products.
Some might read this as a blanket indictment of crypto-ponzinomics, but the other way to read this is that in the web3 gold rush, blockchain founders forgot what it meant to love something because it was a great product and over-indexed for the durability of consumer greed or financial despair. Now the crypto market may pick up again tomorrow, but it will still be true that you can only pay for loyalty for so long.
module #4: Kevin Rose
Hello, Anita still here. In this week’s Chain Reaction podcast, Lucas and I talked about the approaching crypto winter for investors. Overall, public stocks are currently taking a hit, with the S&P 500 dropping for five days in a row, while crypto-related firms such as Coinbase and Robinhood bear the brunt of the market fears.
Cryptocurrency prices are also falling. Bitcoin, the world’s largest cryptocurrency by market capitalization, is down more than 50% from its November peak. It has fallen below $30,000 a few times in the past two days, which analysts say is a crucial hurdle for the coin – if it continues to fall, losses are likely to continue to mount. The ongoing fiasco with Terra’s stablecoin UST, which is partially backed by Bitcoin, is certainly not helping the situation.
But crypto bulls like to talk in decades, not days, and they tend to have a stomach for volatility that is not present in the broader market. This is far from the first time Bitcoin prices have crashed, so it’s worth looking back in time and seeing how Bitcoin fared during the last major crypto winter in 2017. Bitcoin peaked early this year. at $20,000, but fell below that. $12,000 in late December as hacks, regulation and investor jitters reached a fever pitch. It wasn’t until late 2020/early 2021 that it started to appreciate significantly again, when it eventually broke above $30,000, where it has remained (mostly) since.
This time may be different for the OG cryptocurrency. Many more retail investors now have Bitcoin, and only time will tell if they can afford to weather the storm. Moreover, Ethereum and emerging blockchains like Solana have already eaten away at Bitcoin’s competitive advantage. You can read more about the issues plaguing Bitcoin and what the backers are doing to help boost it in my latest post here.
Be sure to watch this week’s episode of Chain Reaction to hear Kevin Rose, co-founder of the viral Moonbirds NFT project, share some wise words during the recession.
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Follow the money
Where seed money moves in the crypto world:
- crypto exchange KuCoin raises $150 million from Jump Crypto.
- Crypto Trading Company Talos raises $105 million from General Atlantic.
- NFT Infrastructure Protocol Co:Make gets $25 million from a16z.
- NFT Marketplace Protocol Zora gets $50 million from Haun Ventures.
- web3 game start LootRush raises $12 million from a16z and Paradigm.
- NFT Boot Ariane grabs $21 million from Tiger.
- Start the NFT checkout Paper takes $9.3 million from Electric Capital and initializes it.
- web3 community launch underline earns $11 million from Haun Ventures.
- Booting NFT Media Soil will receive $1.2 million from Collab+Currency.
- Starting the crypto game MechaFightClub earns $40 million from a16z.
Terra’s UST Crash Will Make Life Harder for Crypto as Regulations Rise
For the past week, stablecoins have been at the center of conversations in the crypto world as a number of factors rock the industry. As the crypto market reacts with bearish sentiments, a big question arises: What does all this mean for the future of stablecoins? A number of market players have considered what the road ahead might look like.
Shark Tank’s Kevin O’Leary Talks Crypto & Why He’s a Stablecoin Pro
Speaking of stablecoins, Kevin O’Leary of Shark Tank sat down with TechCrunch to share his thoughts on some crypto-related topics, such as crypto regulation and why he is pro stablecoin. We also discussed institutional companies entering the space and the kind of crypto-focused business he would create if he decided to do so among other things.
Coinbase’s NFT market is off to a slow start
In other news, Coinbase NFT launched its beta mode three weeks ago as of today, but it still hasn’t been adopted even after opening its doors to the public last week. Anticipation of where he should be now didn’t match expectations, a source said, and it’s unclear if it will ever happen. Given the scale of Coinbase’s crypto exchange, you’d think the NFT market would succeed too, but others say it’s unlikely and the approach to entering the space.
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