Welcome back to Chain reaction.
Last week we talked about an arrest in the crypto world that made investors sweat. This week we’re talking about rocking through the general slump of a crypto winter.
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Crypto has had a brutal few months and yet the show continues — metaphorically and literally for the Winklevoss twins who, despite announcing significant layoffs and suffering a federal lawsuit this week against their crypto exchange Gemini, the multi -city tour have started for their cover band “Mars Junction” playing hits from Blink 182† the killers and Rage against the machine†
The band’s billionaire frontmen (both immortalized by Armie Hammer in the film The Social Network) remade their image years ago with a substantial gamble on the bitcoin ecosystem and while Gemini is lagging behind many competitors, the exchange reached a valuation of just over a year ago. $7.1 billion, but lawsuits from investors and regulators coupled with layoffs could pose problems nonetheless.
High-flying valuations were a hallmark of the 2021 bull run for crypto, with unicorn startups being slapped on a weekly basis as money was dumped into the space, even as consumer interest in web3 services appeared to grow more modestly. But as investors look to Coinbase’s public trials, startups that haven’t raised enough will be about to see more hostile terms coming their way.
This week, The Block and Bloomberg reported that crypto lending platform BlockFi took a massive valuation discount and aimed to raise a round at a valuation of $1 billion, just over a year after cashing in at $3 billion.
Investors are becoming more conservative with their capital, but also a bit more skeptical about exit options.
For public behemoths like Coinbase, the blow to their stock price has caused them to scramble, undo a dime solicitation campaign and withdraw offers to potential employees. Coinbase’s setbacks are likely to be a leading signal of hard times for privately held crypto startups that may not have raised as much runway as they need to. Companies in dire need of growth capital won’t be in a great place, although venture capitalists like a16z will certainly try to keep the lot for start-ups in the start-up phase with new funds largely spent on new betting.
The broader tech industry hasn’t seen a prolonged recession in a few decades, but crypto startups have had to deal with many brutal “winter periods”. As a result, you’d expect them to be a little bit better prepared for the good times to end… and yet many top crypto companies say this latest crash has caught them off guard.
the latest pod
It’s Anita here – in this week’s episode, unfortunately, Lucas and I had to be the bearers of bad news as the crypto market downturn begins to hit workers. Some of the biggest crypto companies are joining the recent spate of tech startups laying off people en masse. We talked about Coinbase’s recent move to withdraw vacancies it had already offered to candidates who had committed themselves to work there, Gemini’s decision to lay off 10% of its staff, and how exactly it got so ugly so quickly.
We also talked about the new account Senators Cynthia Lummis and Kirsten Gillbrand introduced this week that could provide much-anticipated regulatory clarity for crypto, discussing why we think this is a long-term gain for companies building in the space and investors owning digital assets.
Sriram Krishnan, a general partner of the crypto team at a16z (and co-host of “The Good Time Show”), joined us to shed light on some of his recent Twitter steaks and how his experience as an exec informs some of the largest social media companies about its approach to web3 consumer investment.
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Follow the money
Where seed money moves in the crypto world:
- Mobile investment platform delphia raised a $60 million Series A led by Multicoin Capital.
- Calaxya web3 social marketplace, has secured $26 million in strategic funding co-led by Animoca Brands and HBAR Foundation.
- entropya decentralized crypto custodian, has raised $25 million for its starting round led by a16z.
- “It’s Always Sunny in Philadelphia”, the web3 entertainment startup of actor Rob McElhenney, Adimhas raised $5 million in seed funding in an a16z-led round.
- Decentralized exchange ApolloX has secured an undisclosed amount of seed funding from investors including Binance Labs and Kronos Research.
- Euler Financea non-custodial crypto lending protocol, raised $32 million with Haun Ventures as the lead investor in its Series A.
- Data Infrastructure Provider Vybe Network announced the closing of a $10.5 million Series A investment led by FTX.
- mash potatoa payment platform with Lightning Network, has secured $6 million in seed funding co-led by Castle Island Ventures and Whitecap Venture Partners.
- cryptoan institutional crypto accounting platform, got $10 million in a Series A led by Point Nine.
- Launching NFT Portfolio Management Floor has raised an $8 million seed round led by 6thMan Ventures.
the week in web3
As Anita heads to the Consensus crypto conference in Austin this week, we’ve been reflecting on the aspects of web3 that still seem to excite and energize the crowd, even during a rough patch in the markets.
- Web3 entrepreneur Tux Pacific summed it up well: †In fact, I’ve never felt like I’ve been in a space where it was more acceptable for people to be so different. If you go to a [crypto] conference, it’s just filled with weird, weird people,” Pacific told Anita in an interview† Pacific, one of the rare trans, queer founders in crypto with big-name backing, also shared how their unique background informs their fresh approach to building a crypto custodial company.
- It may be a bold time to raise capital to invest in web3, but Ledger, a hardware-focused crypto security startup, is teaming up with French firm Cathay Innovation to do just that. The pair raised $110 million to invest in early stage crypto startups. Ledger founder and CEO Pascal Gauthier told Anita why he is so confident now is a good time to put capital in crypto.
- Solana Labs is doubling down in South Korea, where it sees growing demand for gaming and NFTs. Solana Ventures and Solana Foundation have set up a $100 million fund to support startups in the country – Jacquie has the details†
Here are some crypto analyzes from this week that you can read on our subscription service TC+ (written by Jacquelyn Melinek of TC):
Proposed Bipartisan US Crypto Bill Could Be ‘Sigh of Relief’ for Industry
Earlier this week, US Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, proposed a crypto bill that could provide guide rails around the digital asset space. The bill has targeted many corners of the crypto world and has market players calling it a “step in the right direction” and not an “escape” to strict regulation, but a shift with clearer rules.
DOJ case against ex-OpenSea executive could label NFTs as securities, says former SEC attorney
A former director of OpenSea, the largest NFT marketplace, was arrested and charged last week “With wire transfer and money laundering in connection with an insider trading scheme” [NFTs]According to a press release from the US Attorney’s Office for the Southern District of New York. now this case may have the potential to determine whether or not NFTs are defined as securities.
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