Two weeks in and 2022 is pushing the limits of this newsletter, even with crypto’s market cap down roughly 8% YTD. This week has a little bit of everything: web3 constructive criticism goes viral, crypto firms investing in tradfi giants, NFTs pushing themselves further into our lives, stablecoin debates hitting Congress, three new 2021 year-end reports, and more (somehow).
The crypto-related reading item in vogue this week was My first impressions of web3 from Moxie Marlinspike, the founder of Signal. Its central point, and an important one, is that the blockchain ecosystem today (principally Ethereum) isn’t as decentralized as is assumed. There are certainly some valid critiques, others that can be explained by web3’s nascency, and still others that largely describe issues with the OpenSea ecosystem (a centralized platform). Vitalik Buterin, the founder of Ethereum, responded. His take: crypto currently exists in a ‘missing middle’ in which we have centralized-but-easy things and decentralized-but-hard things, but the industry is evolving (as is the technology) such that we are on the cusp of a 'properly authenticated decentralized blockchain world.'
Paradigm and Sequoia are responsible for this week’s new deal headliner, investing over $1B into Citadel Securities. This is the first time Citadel Securities has taken outside funding and values the business at $22B. This is an especially fascinating deal for Paradigm as Citadel Securities is a market-making firm that does not currently trade crypto. That is, of course, expected to change. While Citadel CEO Ken Griffin has been public about his crypto skepticism, it’s not hard to follow the money: Robinhood, for example, collects more payment for order flow for crypto orders than it does for stock orders. Why use Robinhood as the example? Citadel Securities has long been a major player in executing Robinhood users’ stock trades; however, as crypto took over Robinhood’s transaction volume in 2021, Citadel Securities watched its market share of Robinhood transaction revenues dry up, dropping from 36% in Q2 2020 to 14% in Q2 2021.
The target haul for Katie Haun is now known as she is raising $900M across two crypto-focused funds, aiming for a $300M early stage fund and a $600M fund focused on larger companies and public crypto-assets. She has already made her first investment under the KRH brand, participating in the recent $300M funding round for OpenSea.
NFTs | The hottest acronym in tech doesn’t sleep. The Associated Press announced plans to launch an NFT marketplace to showcase its library of historic photographs and New York will soon be home to the first NFT restaurant. I can’t provide the shortcut for this one, you have to read it to believe it. If this is the future, maybe use this as a reminder to enjoy the present.
Stablecoins | Ramp, the corporate card start-up, announced that it has been putting 5% of its corporate treasury into stablecoins through Circle’s Yield product … PayPal is considering issuing its own stablecoin … and Tom Emmer, a Minnesota Congressman, introduced a bill prohibiting the Fed from issuing a central bank digital currency directly to individuals … Stablecoin supply recently crossed the $150B mark.
Europe | In regulatory news across the pond (for US followers), NYDIG-owned payments startup Bottlepay received approval from the FCA to carry out crypto-asset activities in the UK, making it the first Lightning Network-based firm to win permission from the country’s financial regulator.
The 2021 year-end reports are still rolling in. Last week, Electric Capital’s 2021 Developer Report. This week we bring you 1confirmation’s 2021 NFT Year in Review, Dove Metrics’ 2021 Crypto Fundraising, and blockchain analytics company Chainalysis’ Crypto Crime Trends for 2022. If that sounds like too much to read yourself, I come with highlights. This list is non-exhaustive; please respect my ongoing battle for brevity.
2021 NFT Year in Review: 2021 was the year of the non-fungie after markets exploded in H2 2021 … 2018-2020 saw $96M of total trading volume; 2021 saw $19.6B, 82% of which flowed through OpenSea … PFPs ($13.9B) and ‘cultural collectibles’ ($13.4B) are the largest verticals within NFTs today, accounting for almost 90% of NFT ‘market cap’ … Several emerging trends to watch for in 2022: music, photography, and NFT-enabled DAOs.
2021 Crypto Fundraising: Crypto-related businesses raised over $30B across more than 1,300 financings, with round sizes increasing steadily throughout 2021.
Crypto Crime Trends for 2022: Crypto crime hit an all-time high of $14B during 2021 but actually fell year-over-year as a percentage of overall transactions to the lowest it has ever been. According to the report, criminal activity accounted for 0.15% of all blockchain transactions in 2021, down 75% from 2020 and down nearly 96% from 2019.
If you have found yourself sucked into the black hole of NFT craziness over the last several months I understand (as I now enjoy long waddles in the snow). A bit too much resemblance for my liking.
Source Code
My first impressions of web3:
https: /moxie.org/2022/01/07/web3-first-impressions.html
vbuterin on Reddit: “My first impressions of web3”:
https: /www.reddit.com/r/ethereum/comments/ryk3it/my_first_impressions_of_web3/hrrz15r/
Citadel Securities to Receive First Outside Investment:
https: /www.wsj.com/articles/citadel-securities-to-receive-first-outside-investment-11641905101
Katie Haun Seeks $900M for Crypto Funds After A16z Departure:
AP Doubles Down on NFTs and Launches Marketplace for Iconic Images:
https: /thedefiant.io/nfts-associated-press/
New York’s First NFT Restaurant Is Coming Soon. Wait – What?:
https: /www.grubstreet.com/2022/01/flyfish-club-will-be-nycs-first-nft-restaurant.html?tpcc=nlledger
How Ramp’s early adoption of stablecoins increased our Corporate Treasury returns:
https: /ramp.com/blog/how-stablecoins-increased-our-corporate-treasury-returns?tpcc=nlledger
PayPal Explores Launch of Own Stablecoin in Crypto Push:
@RepTomEmmer “Today I introduced a bill…”:
Today, I introduced a bill prohibiting the Fed from issuing a central bank digital currency directly to individuals. Here’s why it matters:
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NYDIG-Owned Payments Startup Bottlepay Obtains FCA Registration:
1confirmation’s 2021 NFT Year in Review:
https: /drive.google.com/file/d/1l9deH7XuGsNbltAtir6C9LvR7FAbeZ5R/view
Dove Metrics’ 2021 Crypto Fundraising:
https: /docsend.com/view/nrvsuae85a4dx3jz
Chainalysis’ Crypto Crime Trends for 2022: Illicit Transaction Activity Reaches All-Time High in Value, All-Time Low in Share of All Cryptocurrency Activity:
https: /blog.chainalysis.com/reports/2022-crypto-crime-report-introduction/
[Disclaimer: Any opinions expressed are solely my own and do not express the views or opinions of my employer. Because the information included in this newsletter is based on my personal opinion and experience, it should not be considered professional financial analysis or advice.]
