What Zuckerberg’s Money Can’t Buy

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Welcome back to Chain reaction.

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Last week we took a look at Solana’s smartphone and the post-Apple tech industry. This week we are looking at web3 without Big Tech.

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trillionaires are not allowed

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Unlike other technology categories, it is becoming increasingly clear that there is not a large gap in the definition of the future of cryptocurrencies for big technologies.

Meta announced this week that it will be closing its Novi cryptocurrency payment wallets in September. This pilot, which was only available in a few geographies, was pretty much the latest in the company’s broadly ambitious plans for the Diem stablecoin and leaves the company without a clear path for a cryptocurrency that goes beyond its current networks.

This failure was not a surprise, Meta has been a punching bag for regulators for many years, and it has manifested itself most aggressively in stifling their cryptocurrency ambitions, eventually leading to the sale of its assets to Diem and an exodus of its best talent. . Meta is not alone, many tech companies with a market cap of more than $1 trillion (or at least those that were there a few months ago) have not played blockchain despite being ideally positioned. For some companies this may be ideological, but for others it is clear that the regulatory risks are too great for them to jeopardize their other revenue streams.

Comparing crypto to another moon like AR/VR, it’s clear that the government generally has no idea how to regulate internet social media companies, while they have a pretty clear idea of ​​what they’re doing. when it comes to throwing financial instruments and vehicles into the right buckets. The lack of this diversified technology market support means that the lows could continue to drop too damn low for the crypto hopes associated with web3 ambitions. AR/VR has been in a drought for many years, but Meta has been in an industry drought with no clear focus on current revenue, and GAFAM is not going to abandon this investment in web3 anytime soon.

While most in the crypto industry are not going to cry over the fact that Meta is not included in the mainstream crypto toolkit, relying on the luck of financial firms that are fully bought by crypto alone, the current view of crypto consolidation seems so chaotic. . This is likely to be a very hectic year or more for the crypto industry, and the huge war chests of top tech companies won’t make life easy for them.

last pod

Last week, while I was away, you heard from our talented colleague. Jackie Melinek. Well, she’s back! A big thank you to Jackie, who joined us this week while Lucas was sick to help me uncover some incredibly juicy yet complex topics, including how all roads in the DeFi downturn seem to lead to the same hedge. -fund.

By joining us as a guest this week, one of the most memorable founders I’ve met — Tux Pacific of Entropy, a cryptocurrency custody startup. Pacific is a transgender anarchist cryptographer who last month raised $25M in seed funding from a16z and other venture capitalists. They joined us to chat about what it means to raise venture capital as an anti-capitalist and what they think is wrong with the way digital currencies are typically held.

Subscribe to Chain Reaction at Apple, Spotify or your alternative podcast platform to keep up with us every week.

keep track of money

Where is startup money moving in the crypto world:

  1. Echo3D raised $5.5 million for cloud storage and AR/VR streaming in a round led by Qualcomm Ventures.
  2. Web3 Scaling Protocol AltLayer closed a $7.2 million seed round with Polychain as the lead investor.
  3. Cryptocurrency gaming firm Boiler raised $6.6 million led by Cherry Ventures to create “Pixar of web3”.
  4. Binance Labs Leads $3M Seed Investment in magic squarecryptographic app store.
  5. DeFi platform Lab Increment received $1 million in seed funding led by Dapper Labs.
  6. Cryptocurrency tax platform CoinX raised $1.5 million from angel investors including Polygon’s Sandip Neywal.
  7. Second layer blockchain focused on games Oasis raised $20 million in funding from a private token sale to investors including Republic Capital and Crypto.com.
  8. DimensionXa gaming firm playing to cash in received $3 million in a funding round led by Coatyu.
  9. Klang Games received $41 million led by Animoca Brands and Kingsway Capital for its Seed virtual world.
  10. Singapore Metaverse Startup Enginestarter received $5 million from True Global Ventures.

this week in web3

It’s Anita again, back from a week away from work, during which I’ve had time to reflect on the strange cognitive dissonance that seems to be unfolding on Network 3. The valuations look pitiful, crypto lenders declare bankruptcy almost daily, and the overall value of the industry is now only one-third of what it was at its peak last year. But, as Washington Post columnist Sebastian Mallaby notesthe same financial fate befell many other technologies that went on to transform the world.

It is clear that there is still no consensus on what exactly this downturn means for crypto, but one thing is clear to me as I look back on the industry’s recent rapid rise and fall. We haven’t really “seen this before” as many investors and ecosystem participants would lead you to believe. Two major things have changed from past crypto downturns, and both of them are due to the fact that cryptocurrency has gone from being a niche hobby for eccentric people to being a common, everyday dinner table theme.

First of all, crypto companies are now much more interconnected than ever before, reminiscent of traditional finance in 2008. Sam Bankman-Fried is the new Jamie Dimon, helping other companies right and left. Cryptocurrency lender Celsius halting withdrawals last month could very well be the momentum for Lehman Brothers in the industry. I can’t say that I’m too surprised that the crypto markets have sobered up a bit, but there are a shocking number of parallels between the most famous tradfi crisis and the current scourge of crypto. Even if the underlying technology isn’t going anywhere, it’s still a disaster for the industry – let’s not forget that mortgage-backed securities and CLOs still exist despite the carnage of 2008.

The second big difference I see between this crypto crash and past similar cases is that crypto is not so fancy anymore. His path to the mainstream brought a large dose of groupthink, as evidenced by the banal, jargon-like phrases we now hear repeated over and over again.

They say we have “seen this before”, the accident is a “black swan event”, but don’t worry, “it’s still early”. Cryptocurrency will eventually reach “mainstream adoption” and “next billion user recruitment” as long as the founders continue like this because “the best time to create is during a downturn.”

I’m not saying I’m a crypto OG. In fact, I only started following it very closely during those dreary days of self-isolation when so many people were doing the same thing. But I often remember, when I was much younger, I listened with curiosity and wonder as my relative, who loathes authority and loves math, explains to me why blockchain can change the world. It makes me nostalgic for the days when crypto was a space filled with opposites, outcasts, and truly independent thinkers. For me, this is the most interesting thing in this space, so I say: let’s leave the cryptocurrency as strange.

TC+ analysis

Here are some of this week’s cryptanalysis, which you can read on our TC+ subscription service (written by TC’s Jacqueline Melinek):

Cryptocurrency losses in the second quarter reached $670 million, up 52% ​​from last year.
The second quarter of 2022 was a distinctly turbulent period for what I like to call market frenzy, and the evidence for the crypto markets continues to pile up. According to a new report, the second quarter was full of huge crypto “losses” in the web3 ecosystem, about 97% of which were the result of hacks.

Cryptocurrency Trading Volume Drops in India as Additional Taxes Hit Investors
On July 1, the Government of India introduced a 1% withholding tax (TDS) on every cryptocurrency transaction over INR 10,000, or about $127. The law has only been in place for a few days but has already had a chilling effect on Indian digital asset markets. Raising taxes could also act as an additional hurdle for citizens wishing to trade cryptocurrencies as the potential for financial gain dwindles.

FTX policy chief says his ‘priorities haven’t changed’ amid market frenzy
As the crypto markets continue to fall, the world’s second largest crypto exchange, FTX, remains adamant. “Our priorities haven’t changed,” Mark Wetjen, head of regulatory policy and strategy at FTX, told TechCrunch. “Markets will do what they do, but the reality is that the digital asset market and digital asset ecosystem, we believe, is not going anywhere.”

The SEC again rejected bitcoin spot ETFs. Now what?
The U.S. Securities and Exchange Commission has rejected applications from Bitwise Asset Management and Grayscale Investments for Bitcoin spot ETFs. Shortly thereafter, Grayscale — one of the largest digital asset managers, with about $20 billion in assets under management — filed a lawsuit against the SEC. But not everyone is sure that the lawsuit will go in their favor …

Valkyrie CEO says bitcoin ETF lawsuit against US SEC ‘unlikely to succeed’
“The SEC is rejecting Bitwise and Grayscale GBTC spot bitcoin ETF filings not at all surprising because it follows the same precedent that other asset managers have experienced,” Lea Wald, CEO of Valkyrie Investments, said in a Twitter thread. “Filing a lawsuit with the SEC is unlikely to succeed.” In its response, the SEC made it clear that it views the underlying assets of futures and spot as fundamentally different, in part because the former trades on a regulated market and the latter on unregulated markets, said Ryan Shea, a crypto economist at Trakx. tech crunch.

Thanks for reading! And, again, to get this in your inbox every Thursday, you can subscribe to TechCrunch newsletter page.

Good weekend!

Lucas and Anita

Credit: techcrunch.com /

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