The Breakdown - What Billions of Dollars in Crypto Fundraising Says About the Bull Market

Episode Date: November 20, 2021

This episode is sponsored by NYDIG. Description From $400 million to a crypto exchange to $2.5 billion for the biggest crypto fund in history, NLW tells the story of this week’s big fundraising events by the numbers.  NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Michele Musso & Adrian Blust, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Nuthawut Somsuk/Getty Images Plus, modified by CoinDesk.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, November 20th, and that means it's time for the weekly recap. And this week, we are going to take a tour through the numbers that define the week. About half of them are fundraising announcements, which show just a little bit of the week. just how crazy things are still out there, no matter what you're seeing or thinking or feeling in terms of bull or bear markets. But then the other half are just interesting numbers that I think

have something to say about the week that was. And let's start, of course, with 40 million. If you listen to my show yesterday, you know that that is the biggest bid that Constitution Dow, the Dow that formed in just seven days that raised contributions for more than 17,000 people. that was the biggest bid they could make to try to buy one of the earliest surviving copies of the Constitution, a document that was actually used to go try to rally and whip support for this thing in the early colonies in 1787. I did a whole show about it yesterday, but I definitely believe that this is the number this week will be remembered for. A couple tweets that sum up where people are with it right now. Ryan Watkins at Masari wrote, while this is a disappointing outcome,

Constitution Dow was nevertheless a groundbreaking crowd fund. 40 million in just three days is no joke. We're still on day one of Dao's taking over the world, and this won't be the last time a community comes together to leave their mark on the world. David Nage from ARCA actually looked forward even more, saying so, Constitution Dow raised $40 million. That could have supported 20 House candidates based on 2018 statistics. Primary Dow, imagine the potential.

Next up, we have 700 million, and that's how much crypto.com is paying to rename Los Angeles's iconic staple center. Now, I've told you guys before that I work with FTX on marketing, so I'm certainly no stranger to big stadium naming deals, but this is a huge one, no doubt, and big congrats to crypto.com. The staple center is absolutely iconic, and I love that a new generation of people is going to get to associate it with our industry. The next number on our list today is 53,000, and that is the current cost basis for short-term Bitcoin holders. Now, this to me is a really important one.

Obviously, I don't need to tell you that the market has been the poop emoji for Bitcoin this week, but one really important statistic is the cost basis of short-term holders. In other words, the average price that short-term holders got in at, which determines whether or not they're in profit. Right now, that number is just under 53,000, and as Will Clemente puts it, short-term holder realized price or cost basis, has been a very interesting level that Bitcoin price has historically interacted with. This is served as a floor during bull markets. Currently sits at 53K. So if that remains, perhaps that's the floor that we should expect right now.

NIDIG, the sponsor of this podcast, provides banks, corporate treasuries, pensions, and hedge funds with ironclad Bitcoin custody and white-gloved service. Learn more at NIDIG.com slash NLW. That's nydig.com slash NLW. The next number in our weekly recap is $500 million, and that's the amount of debt that publicly traded marathon issued in order to buy more Bitcoin and more Bitcoin mining machines. This is a full-on Michael Saylor-esque speculative attack on the dollar. The strategy is to lever up, lever up on debt denominated in what you believe is an inflating currency, and use that debt windfall today to buy Bitcoin, or in the case of Marathon Bitcoin miners. Sailor himself commented on the deal, saying a publicly traded Bitcoin miner is raising $500 million

in a debt offering to acquire Bitcoin and Bitcoin mining machines. This is not factored into anyone's model. Now, one of the other interesting things about this is how much it shows how different miners are looking at the markets than at previous tops. These guys are leaning in and buying more rather than following the old pattern of selling near the top. It's an indication to me that fundamentally, this publicly traded mining company's expectations and ideas about the Bitcoin market cycle have changed. The next number we're going to look at today is 99%. That is the percentage of wealth that CZ, the CEO of finance plans to give away. He gave an interview with the Associated Press, and it's part of a larger mainstreaming offensive

that he's been on over the last few months. Now, CZ's wealth has been estimated by Forbes at $1.9 billion, but honestly, that's laughable. He's the majority owner of Binance, which some former employees in the Wall Street Journal said might be worth as much as $300 billion if it were to go public. He also owns a plethora of B&B. Indeed, many have pegged CZ as potentially the wealthiest person in the world. The statement around giving away his wealth was this. Personally, I'm financially free.

I don't need a lot of money and I can maintain my lifestyle in this way. I do intend to give away most of my wealth, like many wealthy entrepreneurs or founders did, from Rockefeller until today. I do intend to give away 90, 95, or 99% of my wealth. I'm all for this big philanthropic commitment. I'm all for CZ being loud about it. To the extent that it helps shift the idea of crypto as just pirates and brigands, bring it on. Now to the fundraising, in no particular order, Starcware has raised $50 million at a $2 billion valuation.

Sequoia's thread about the deal also sums up the bull case for Starkware pretty well. They write, Ethereum has been at the heart of a lot of innovation in crypto for the past few years, defy NFTs, Web 3, and more. While those use cases offer a glimpse of what's to come, the mass market success is limited by the price and throughput of the Ethereum network. While sharding and proof of stake will take Ethereum from tens of transactions per second to thousands of transactions per second or more, Ethereum and similar networks will need millions of transactions per second or more in order to reach their full potential as a global decentralized computer. Zero Knowledge ZK roll-ups offer the most tantalizing solutions for scaling Ethereum and similar blockchains. Instead of every node repeating every single computation, one node can run the computation, produce a proof,

and all other nodes can efficiently verify it. The security of the system is based in the same kind of cryptographic math that underpins the blockchain. Starkware has emerged as the market leader in ZK roll-ups, iterating at a breakneck pace to power a wide range of applications. Next up we have Forte, which has raised $725 million. This one is wild and shows just how big VCs are betting that blockchain-based games will become. Forte provides blockchain solutions for game publishers, and it's a little confusing around whether they're public or private. They're theoretically currently in invite-only private testing, but their spokesperson also said, quote, we are live in over 10 titles today and have nearly 20 million monthly active users

across all Forte-powered games. Each game decides how and when it would like to move from testing to full live operations on public L1 and L2 blockchains and networks. So Forte does not have its own blockchain. It plugs into others to allow community token economies for games. And this raise comes just six months after a $185 million Series A at a $1 billion valuation. consensus has raised $200 million at a $3.2 billion valuation. And a lot of the emphasis here is on Metamask, one of the leading digital wallets which now has

21 million users. People have pointed out that that's about the same number of users as the internet had overall in 1997. Joe Lubin, who's long gone by Ethereum Joe, wrote, The Age of Silo's and Trusted Third Parties is giving way to the Age of Community and Collaboration, enabled by an automated objective trust foundation and a decentralized finance ecosystem. The paradigm shift to a world running on decentralized protocols is in full gear. The pace of adoption is now so rapid that we've more than doubled many of our core KPIs

since this deal was struck over the summer. Next up, we have a $600 million credit facility for the digital currency group, maybe the leading conglomerate in this industry so far, who own grayscale, of course, and coin desk, among other things. This new $600 million credit facility effectively allows them to do more of everything they're doing. According to their press release, that includes financing the growth of investment portfolio companies, as well as wholly owned subsidiaries. The story here is at least in part about the availability of credit and debt as alternatives to venture,

although perhaps complement is a better term than alternative, given that DCG also raised traditional venture at a $10 billion valuation just a couple weeks ago. The breakdowns overnight researcher Scott Hill put it pretty crisply into, today's show notes where he wrote, if the markets will give 3% money in a 6% CPI world, then it's hard to turn that down. Okay, so we've had consensus, DCG, what other crypto-OGs raised? Well, Gemini, of course. Gemini has raised $400 million at a $7 billion valuation, and amazingly, this is their

first outside money, which is a huge accomplishment all on its own. What's more, Cameron and Tyler Winklevoss didn't sell any stock in the round. And as someone who spent a decade in and around Silicon Valley, that's very rare. Founders usually get some liquidity, but not Cameron and Tyler. They're all in on the value of this company. Now, they aren't giving any details of how the new money will be used, but the narrative is definitely forming that this is the final battle looming between the Winklevoss twins and Zuckerberg.

From a Forbes piece about the raise. There's these two parallel paths. There's a centralized path like Facebook, one step away from being a men. metaverse. But there is another path, the decentralized metaverse. That's the metaverse where there's greater choice, independence, and opportunity. The Winkleweye are back. They've raised $400 million, and they're coming for the metaverse. Our penultimate number today is $10 billion. And that's the reported valuation at which investors are considering a new investment into OpenC, the leading NFT marketplace. Now, this clearly shows how highly investors are valuing the NFT ecosystem, especially

as OpenC faces some growing pains. I've discussed previously on the show the scandal of their former head of product, front-running users by buying NFT collections. He knew we're going to be listed on the home screen. And then just yesterday, they accidentally doxed 95 NFT owners via email. But ultimately, growth is growth, and growth is what speaks to VCs. And while this isn't a done deal, or at least a reported deal yet, the information tends to be pretty good about this stuff, so I felt comfortable at least sharing the numbers here.

Finally, our last number today is $2.5 billion, and that's the size of Paradigm's latest venture fund. Paradigm is the largest natively grown crypto fund, and this new one, I think, makes it even bigger than A16Z's crypto funds, meaning that it's the biggest crypto fund in the world. Now, one of the things that has made Paradigm different is that they tend to hire researchers and really smart people to just come in and explore things and let that lead a lot of their thinking on the frontiers of the crypto industry. Whatever they're doing, LPs clearly think they're doing something right, and the massive size of this round, if nothing else, shows where we are. Now, one of the reasons it's interesting to look at big fundraising numbers is they have a lot to say about what might happen in any sort of market downturn. The better financed companies are going into a crypto winter, the shorter that crypto winter is likely to be. While the availability of capital for private companies doesn't dictate the sort of macro factors that might influence how the crypto markets are doing, it certainly allows for a continuation of the momentum in terms of new products being developed

and new features being released and new funds and investments actually happening. All of this is to say that I think that it's pretty clear that the bull market is not over yet. But for now, guys, I hope you're having a great weekend. I appreciate you listening. And until tomorrow, be safe and take care of each other. Peace.