The Breakdown - Special Edition: Summer Recap & Fall Predictions from 15 of Crypto's Top VCs, Entrepreneurs & minds

Episode Date: September 4, 2019

To celebrate the official end of summer and beginning of fall, I asked 15 top crypto VCs, entrepreneurs and content creators including Jill Carlson, Ari Paul, Kyle Samani, Marty Bent and more 4 questions: What did we learn this Summer? What are your predictions for the Fall?  What is one thing we're not talking about?  What is the price of BTC at the end of the year? (Up/Down/Sideways) These are their responses, and together they tell the story of an interesting moment in crypto.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another crypto daily three at three. All right, what's going on, guys? Happy September. For those of you in the U.S., obviously last weekend was Labor Day, which is kind of like the official end of summer beginning of fall. And so for Longreed Sunday last week, I wanted to do something special where it was kind of a retrospective issue. And so I asked a bunch of really interesting, really smart people from a bunch of different parts of the Bitcoin and Crypto space

to answer four questions. First, what we learned over the summer. Second, what they think happens next. So predictions for the fall. Third, what we're not talking about enough. So what areas we should actually be spending more time on. And then four, because we can't help ourselves in this industry, where the price of Bitcoin will be in comes December 31st of this year. So by the end of the year, where will Bitcoin be? For those of you who are watching, I apologize, this is not a particularly visually interesting three at three as I'm just kind of going through the thread. And for those of you who are listening or watching, who are ready to be back to just actually contemporary news, tomorrow we'll back on as normal. We might look at some of the things that have happened over

the last week rather than just the day, but whatever the case, it won't be this sort of retrospective thing. But hopefully you guys think this is fun. Let me know. So let's dive in. So question one, what did we learn this summer? Obviously, there's lots of different things that happened. And the question is what actually stood out. So a number of people referenced this idea that exchanges were a huge part of this summer and just showed their power this summer, right? So Mike Dutis from the block, he wrote, exchanges are shipping at unprecedented rates.

Kyle Simani from Multi-Coin Capital made the point, I think, even more clearly. He says, exchanges are the most dynamic area in crypticryptory. in terms of new entrance and market evolution. There was some counterpoint in terms of one of the phenomenon that we've seen be most talked about from exchanges, which is this idea of initial exchange offerings or IEOs. So Maya Z says, IEOs are over and were a bare market phase. I think that's an interesting contention. We've seen some, we've seen data from Larry Sirmaster over at the block.

about performance of IEOs and certainly, you know, they haven't, as much as people wanted them maybe to be ICOs 2.0, they have not brought that type of attention to the space again, which, by the way, I don't think is a bad thing. But it's interesting that maybe they were, this idea that maybe they were a product of that. I think that obviously that'll be borne out or not by the next few months. Another really common theme of the what we learned this summer, which I think will come as a surprise to literally no one, is the idea that, as Crypto Dogg put it, that Bitcoin is king again, right? So as we're recording this today, I think Bitcoin is at its largest, you know, dominance index or whatever

relative to the size of the rest of the crypto market for a year and a half or two years or something like that, a long period of time, and it just kind of keeps going. And obviously this is to say nothing of any sort of liquidity. modified determination of, you know, the dominance index. Chris McCann, who's an investor who's at, you know, does interesting content as well, said, Bitcoin is still king and the dominant use cases are still money, trading, and mining.

While there are a lot of things happening in the smart contract space, the summer felt more like back to basics and more fundamental things. There was some interesting kind of conversation around the fallout of the idea of DAPs and ICOs. So Anthony Sassel wrote, most crypto-based apps are still trying to find product market fit.

Breaking through to a mainstream audience is going to be much harder than originally thought. I think one of the really fascinating phenomenon in this space has to do with the early liquidity that ICOs provide. So ICOs in a lot of ways were a risk capital formation mechanism. that was more akin to, it created public market dynamics in a private market time or a private market context almost. And what I mean by that is that when you have a venture capitalist or an angel investor or a seed investor funding a startup, their expectation of time horizons is very different than what a public market investor's expectations of time horizons are. I mean, certainly different public market investors have different strategies that can be different on the basis of their

time horizon expectations. But when it comes to startup investors, you really don't have a choice, right? You are in it for the long haul. The long haul can be very long. Part of the reason that venture capital is small relative to the size of the overall available capital in the world is that you have to lock up your money for a decade or more. And we could talk about that forever. But what ICOs did is they created this incredible expectation of speed and that public market hyper-focused kind of dynamic in what is ultimately a private market space. And so, you know, I agree with Anthony that that most apps are trying to find product market fit.

I would go farther, though, and I think that it's what we've seen is that in addition to just enabling, you know, this very weird incentive arrangement where when founders of promising projects have liquidity right away, they have the guaranteed thing of cashing out then or the much less guaranteed thing of trying to build a real cost. company, even the ones who persevere through that, they still have, they're constantly with their back against the wall, against the sense of how long things are going to take. And I think, so I think that the entity's right that things are going to be much harder than originally thought, but I think that our original thought might be, might be kind of wrong.

Okay, so another topic that was very all over the place this summer, and obviously we talked about it a ton on three on three was the new mainstream attention that came to the industry in large part due to to Libra, right? Libra in a lot of ways hyper-accelerated the focus, particularly from regulators and from central banks on this area, this industry. It provided a credible threat to the money printing capacity in a way that as much as we love Bitcoin, it had not yet for those regulators, whether they're right or wrong. And I think a lot of us think that they're wrong, but Libra was not so. Libra brought with it both Zuckerberg's, I'm going to do what I want kind of attitude,

plus two billion users. And so we saw that reflected. A lot of the folks who responded to my call for kind of reference points pointed out this new attention. So Jack Purdy, who works at Masari, it's one of their researchers and does a lot of their content. He wrote, the powers that be regulators, central banks, national corporations are all starting to pay attention. Travis Kling from Mikey Guy said, this summer we learned that crypto is moving front and center on the global stage. Jay Powell

testifies about it, Trump tweets about it, Mnuchin gives press conferences on it, Congress holds hearings about it. We learn that regulators think Bitcoin does not equal Libra. Jill Carlson, meanwhile, who's now at Slow Ventures, points it kind of in the Wall Street direction. He says, discussions of Bitcoin have become a staple of Wall Street macro research pieces alongside gold and USD. Bitcoin correlations are on the rise. The best indicators of price may be keeping an eye on trade war tensions, global interest rates, and USD strength. So what Jill is getting at is this idea of the safe haven narrative, this idea of Bitcoin as a good

place to park your money in the context of raising global instability. You know, it's been interesting. that narrative had a real crest right as the trade war heated up. And the, you know, one Monday, basically, after a lot had gone down in the trade war between Trump and China, Bitcoin surged as stocks fell a huge amount. And that's really where it bubbled over from something that we had been saying in our kind of circles into something that the mainstream media was questioning. And now Bitcoin being Bitcoin has not necessarily function in the same way for the subsequent three weeks or whatever it's been. But I don't think that that necessarily mitigates either, A, Bitcoin's potential as a really interesting and differentiated

place in the context of larger market instability, or B, the fact that that narrative is continuing to be churned around. So, you know, in a lot of ways, I think that, to me, was the story of the summer. It wasn't just Bitcoin's back. It was this idea of, it's almost transcended this store of value narrative into a very, very different space. So let's go into question two, predictions for the fall. This is obviously a really cool way to get a sense of what some different folks think. So Zach, who writes the excellent crypto AM newsletter, he kind of hit on a topic, which I think is also something that I've been seeing a lot, which is the idea of the rising global competition for digital money.

So this is, I think, the thing that came out of Libra, right? So his prediction says, China's central bank digital currency release gives other central banks cover to be more aggressive with developing models for theirs. You know, when Libra came out, a former governor from the Chinese central bank said that they should accelerate the project,

and then a month later, there were reports that they were getting ready to release. and then one of the officials who works with them said they were nearly done after five years of research, and there's been not quite clear reports that maybe it's coming as early as November. So obviously, China's in specific, but it's not just China. We've also seen reports from Rwanda that they're exploring a central bank digital currency. We're seeing the Marshall Islands just released a piece on Coin desk and said they have some announcement and invest Asia next week.

And so obviously, you know, the Marshall Islands and Rwanda, these are small countries. China is a different ballgame entirely. And China racing in this space is going to create a very interesting dynamic. Chris McCann, again, points out something similar, but I think he adds an interesting clarity. He says China's version of Libra will launch first and be much faster and aggressive with respect to distribution. However, both of these efforts still miss the underlying premise that Bitcoin is a non-sovereign SOV. So what he's pointing out is something that I think was a discussion for a lot of us as well,

which is that that battle is going to happen between Libra's and Binance Venus and the central bank digital currencies. Meanwhile, Bitcoin might just continue to merrily hum along its way, growing its security, the size and strength of its network, as it always has been. So that'll be interesting to watch. So again, predictions for the fall back to Travis Kling. I think the thing that I wanted to point out about his point. So he says many indicators tell that Bitcoin is in the top of the second quarter of a cyclical bull rung, which will peak at prices meaningfully higher than 20K in the next 12 to 18 months. The biggest risk to this is

traditional asset classes. Real stress there will hurt BTC. So basically, Travis is arguing that, despite that say, Havaevna narrative, current, it's unlikely that Bitcoin is unaffected, basically, by a larger global market downturn. Now, some of the other folks kind of took this in a direction that was outside of Bitcoin in terms of their predictions. Kyle Samani, again, says a handful of new smart contracts platforms launch, Solana and NIR specifically. I think the interesting thing here is just that, you know, no one really mentioned it, which could be honestly a little bit of the selection bias of, you know, who I reached out to,

although I tried to be kind of diverse, but also who had time to get me responses. there wasn't that much about Ethereum here. I do think that to some extent that's because, you know, the Ethereum community is continuing to figure out exactly how it's going to run, how it's going to function. And meanwhile, all of these new smart contract platforms continue to launch. None of them at this stage really currently seem to present a threat to Ethereum. But there's certainly tons of energy and attention there.

And the pace of those projects coming to market seems to continue. Erie Paul actually added something that I thought was kind of surprising to me. I expect growing attention on DAPs, decentralized apps, with usage both within crypto communities and beyond. We may get some recognition from traditional gaming studios now that there are crypto games with 10K plus daily active users. Anthony Sassel made this specific. He says the Ethereum-based game, Gods Unchained, will bring more new people into the

crypto ecosystem than any other DAP has so far. So this is super interesting, right? We're seeing that maybe one bright spot in a larger context of what happened post-ICO and this whole idea of tokenize everything and decentralized applications is that the gaming space does continue to build and grow. And we're seeing some amount of energy there and maybe that will continue. So I think that's a lot of interesting predictions for the fall. But I thought that, you know, in addition to just predicting the stuff that seems clear, you know, we tend to have tons. vision in this space. So what are the things that we're not talking about enough? And there were a lot of really diverse answers. So we have Taylor Monaghan from my crypto, the wallet, saying, why were older

narratives even dominant ones with longevity lost? I think she's commenting on this idea of how fast our narratives and our memes change and what that means for the space. We have Drew Hinkies, who's a legal expert in one of the kind of fast-refer. responding crypto Twitter lawyers. He said he predicted more regulatory enforcement for the fall, which is, you know, I think especially in the context of Lieber like we were talking about, it seems possible. Chris McCann, he focused on Asia. He said more focus on Asia is what he's arguing for.

Exchanges and trading infrastructure in Asia, he says, which whether you like it or not drives the vast majority of trading volume in the crypto ecosystem. A lot of really interesting, so a lot of really interesting things there. There are a number of people who kind of mentioned this idea of focusing on where crypto can actually help people's lives, although they had different perspectives on exactly what that might look like. So, Zach, again, kind of took a defy in a different direction, and he wrote, generally, we need to have a hard look at where crypto is actually improving people's lives

and do more to support projects that are actually working on ways to empower this. Tyrone Ross echoed this as well. He said we should be talking more about how crypto can help inner city and unbanked communities right here in the U.S. Jack Purdy said we should really be talking about ways to educate the masses, not just writing good one-on-one medium post, but figuring out ways to structure courses or programs to get people learning from the best. And he referenced the Bitcoin-A's event from this past weekend. So, you know, I think that there's obviously a huge amount.

that we can be talking about. You know, when it comes to the idea of mass adoption, it's a theme that I see over and over and over again. And what are ways that we get more people educated? You know, I think that to some extent, it's almost a kind of a both-and game of you need these different initiatives and on-ramps almost. But at the end of the day, I think so much of this is going to be driven by, you know, things like how Bitcoin performs relative to the rest of the market. And if you flip over to kind of the DAP side, how new digital experiences powered by crypto tokens or digital assets or whatever they may be actually infiltrate people's lives, right? I think it's in some ways it's less about education, although we need those resources

there so people understand what they're kind of dealing with and more about the actual applications just infiltrating people's lives in ways that make them better. And that's a do more than a talk, I think. So lastly, let's wrap up with what the price does from here. It's always fun. Most people, smartly, I might add, recuse themselves from this question and said no. But there were a number who were willing to kind of put their pin on it. A lot of people thought it was going to go sideways.

So we're going to kind of be in this holding pattern around 10K. Some people said it was going to be up considerably, up slightly. Dutus from the block said up slightly from the current price of 10K. But I like what he added was 2020 will be another year of significant price appreciation on the back of new products being built in 2019. So basically he was saying that this is continued to be kind of an infrastructure year. And he anticipates seeing more price appreciation next year as those things come online. you know, backed launching their futures product in a couple weeks as an example.

Ari Paul made sure to preface this by saying his opinion was very weakly held, but he said, I expect general sideways consolidation for the next two months, followed by a bull market that may have Bitcoin end the year at around 13K. But I think in some ways my favorite of these was Travis Kling, who pegged it to the volatility index. He said, tell me where the volatility the index tops out between now and year end and where it ends at year end 19 and I'll tell you where the Bitcoin price will be. So anyways, a lot of interesting thoughts here. I think that for me, the story of the summer really was what Libra did to the industry, how it's changed our focus, how it's changing, how we think about things, how it's changing how governments, you know,

think about things and how aggressive they're being with regard to their own cryptocurrencies. My prediction for the fall is that continuing. I believe that we really are going to see a huge amount of attention and energy on exactly, basically on the competition for new digital money. I think that that starting gun has happened. And in some ways, I think that even though we're talking about it, I think that we're almost not talking about it enough. I don't think we've really rocked the implications of the real no-b-s competition for global money. So that's what I think, and that is Crypto Daily 3 at 3 for today. Like I said, tomorrow we will be back with traditional three news topics that are happening right now.

But I hope that you enjoyed this. I hope that you liked the chance to kind of see what some very interesting minds thought. let me know and thanks for hanging out i will see you tomorrow guys peace