February 2, 2022 | Issue #206
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MUST READS
FTX vs Everybody
It's safe to say that FTX may just have the best marketing team in crypto.
Not only are they attracting retail users through sponsorships with the likes of Tom Brady and Coachella. And not only are they attracting companies looking for capital with their recent $2 billion venture fund.
But, they are also obviously creating FOMO among VCs who must be clamoring to get exposure to the company.
Case in point: This week FTX closed a $400 million round, valuing the company at $32 billion. This, only days after FTXs US affiliate FTX-US also raised $400 million at an $8 billion valuation.
Now, if you were like us, you were probably asking yourself: What the hell does FTX need another $800 million for if they just raised $420 million just four months ago?
Well, today FTX announced the acquisition of licensed Japanese crypto exchange Liquid. Although deal terms were not disclosed, Liquid was valued at more than $1 billion in a 2019 investment round.
Now for the interesting part...
Technically, the combined valuation of FTX and FTX-US at $40 billion puts FTX at the same valuation that Coinbase (COIN) is currently trading at in the public markets (after falling 40%+ since listing).
It also makes the company more valuable than Robinhood ($12 billion), Credit Suisse ($22 billion), and Nasdaq ($30 billion). Now, private to public markets aren't exactly apples to apples... but it is an interesting comparison nonetheless.
Looking directly at crypto exchange comparisons, the raise puts FTX at a significantly higher valuation than Gemini ($7 billion) and Kraken ($10 - $20 billion).
Coinbase Adds CEO Of Shopify To Board Of Directors
As easily the top retail trading platform for crypto users, Coinbase continues to receive criticism from both users and investors alike that their trading fees are too high.
Although Coinbase believes that they have a competitive offering that justifies the trading fee, they have explained that the fees will come down in time. As a company where most of its revenue is derived from trading fees, investors are wondering where the company will derive revenues going forward.
With this, and in the face of FTX competition (see above), Coinbase has added the CEO of Shopify (SHOP), Tobias Lütke, to its Board, potentially telegraphing its next move...
As the founder of one of the most impressive SaaS companies in the world, Lütke has built a B2B e-commerce company allowing merchants to create a website to sell goods online.
Coinbase may be looking to tap into Lütke and Shopify for two reasons:
1. Smoothing out the companies revenues
Shopify already allows its millions of customers to pay in crypto with Coinbase Commerce (Coinbase's B2B offering that allows businesses to integrate crypto payments). By doubling down on Commerce, Coinbase could be looking to create a more predictable and less volatile income stream.
CoinSnacks uses Coinbase Commerce to take sponsorship payments in crypto (sponsors :) reach out here), and we sure wouldn't mind more effort put into the tool from Coinbase (it's clunky).
2. Access to millions of new potential customers
With nearly 2 million merchants on the Shopify platform, the company has a great network of potential new customers that Coinbase could onboard.
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DEEP DIVES
This Time is Different...
Bear market or not, there has never been a time where so much capital has flown into the underlying infrastructure of crypto/blockchain technology. With war chests into the hundreds of millions of dollars, these companies will continue to hire and build regardless of how market prices perform.
Here's just a sampling of raises in the last week:
- CoinTracker Raises $100 Million Series A at a $1.3 Billion Valuation
- Crypto Custody Firm Fireblocks Raises $550M at $8B Valuation
- Blockdaemon Raises $207 Million Series C at $3.25B Valuation
- Phantom’s Raises $109M Series B at $1.2B Valuation
- Dune Analytics Raises $69,420,000 Series B at $1B Valuation
...Not to mention FTXs $800 million raised that we covered in story #1.
Introducing DINOs: Decentralized In Name Only
Not all DAOs are decentralized. Case in point? See what's shaking up at ApeDAO.
The Backdrop:
The DAO started off in June 2021 with a collection of highly-prized NFTs... and a mission to gobble up more NFTs as the community grew larger. Joining members would receive APED tokens that represented voting rights and a fraction of ownership of the treasury. Fast forward to today, ApeDAO is now the third-largest holder of Bored Apes and fourth for Mutant Apes. The DAO also holds several tokens from other highly sought-after collections including CryptoPunks, Fidenza, and Cool Cats. With the DAOs growth, tied with the rapid rise in NFT popularity, the ApeDAO treasury has accumulated a whopping $31M.
The Problem:
All was going quite well for the DAO until a recent proposal started to gain some popularity between members.
“Given the current gap between APED price and net asset value of DAO holdings, liquidating the DAO would generate substantial returns for APED Holders," the proposal states.
The proposal points out that the value of the APED token is worth far less than the value of the DAO’s digital assets. Given the value of the NFTs owned by the DAO, proponents of liquidation say APED ought to be priced somewhere between $16 and $21. Prior to the proposal (and arb traders taking advantage of the news), APED was trading between $5 and $7.
The BIGGER Problem:
While over 80% of voters seem to be in favor of liquidating, members are now just discovering that all of the DAOs assets are held in a multi-sig wallet that is controlled by only four signers.
In the event of a liquidation, two of the four signers would be needed to move any assets. And as of today, despite the voting ending tomorrow, there's only one signer. AKA - the community's votes don't matter.
If you're a part of a DAO, you might want to check if the members have control, or the founders. Is it really a decentralized community, or is it a Decentralized In Name Only (DINO)?
P.S. Soon, we may just see crypto-activists pushing for DAOs to liquidate or change in the classic means of "unlocking value." Just imagine what the proposals of modern-aged Paul Singer or Carl Icahn would look like. 🔥
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REGULATORY FRONT
Regulating the Metaverse(s)
Large or small... some form of the Metaverse is coming. And for all of its potential for good, like anything, it has the potential to be abused as well.
Communication around the borderless nature of the Metaverse and its function around safety, privacy, taxation, worker classification, and consumer regulation will be necessary.
If you are interested in answers to questions of what the future for the Metaverse looks like, we don't have them. But these two articles are a place to start:
Crime and NFTs
Although it's a drop in the bucket in comparison to other crypto-based money laundering activity, blockchain analytics firm Chainalysis looked at two forms of illicit activity observed in NFTs:
- Wash trading to artificially increase the value of NFTs
- Money laundering through the purchase of NFTs
“As is the case with any new technology, NFTs offer potential for abuse."
Related: Over 80% of free NFTs minted on OpenSea were plagiarized, spam or fake.
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