At the time of publication Bitcoin is trading at $4,300, up 30% in the past week (boosted, in part, by strong demand from Japan driven by events around North Korea). Ethereum is up 15%. The total market cap of all cryptocurrency as tracked by CoinMarketCap is at an all time high of $140B. All great stuff, but noise in the long run.
What’s obviously important to the long run success of crypto currency is the the infrastructure that is being built to enable scaling. What’s important is continued innovation. What’s important is a clear regulatory framework. What’s important is institutional adoption. Here’s my list of the 6 most epic things that happened just last week.
- Goldman Sachs reported that ICOs raised more capital for early stage companies in June and July than traditional VCs. Goldman dedicated two pages in it’s August 8th “Portfolio Tracker Toolkit” Report to Cryptocurrency. Most notable was this chart:
That’s disruption. The fact that Goldman is writing crypto research, is seminal in and of itself. Turns out, they do great work(see the chart below)
But, it’s important to note, that even Goldman does not have a crystal ball relative to the price of Bitcoin.
2. Coinbase becomes crypto’s first Unicorn company raising $100 million at a $1.6 billion valuation from blue chip VCs. Per CEO Brian Armstrong’s blog post, the money will be used to grow the team, open an NYC office for GDAX (a top 10 institutional crypto currency exchange), and invest in Toshi, it’s “… browser for the Ethereum network” introduced during Brian’s closing keynote address in May at Consensus. The round was lead by iconic Silicon Valley VC IVP, who previously had not made a crypto investment.
3. Fidelity Enabled Coinbase Clients To View Their Cryptocurrency Holdings On Fidelity.com — Fidelity is the 4th largest U.S. asset manager, with over $2 trillion in assets under management. Fidelity Labs, Fidelity’s innovation unit, stated that “..the experiment is in the spirit of learning what these crypto assets are like and how our customers may want to interact with them.”
4. CoinList launched it’s first ICO, Filecoin, on it’s Platform. Naval Ravikant is visionary (a word I don’t use often.) I believe AngelList is the most disruptive company in the history of venture capital. CoinList, AngelList’s platform (in partnership with Protocol Labs) for launching ICOs, could end up being just as disruptive as AngelList. CoinList’s mission is to be the platform that enables investors to invest in ICOs compliant with securities law. The Filecoin ICO is blazing the trail for compliant ICOs by employing a SAFT (Simple Agreement for Future Tokens), similar to the SAFEs commonly used in early-stage financings, and by allowing only accredited investors to invest in the U.S. (similar to AngelList).
5. Investor/Commentator Puts Out $25,000 Price Target On CNBC. Cryptocurrency is seeing unprecedented interest from mainstream business media. Bitcoin is the #3 story on the front page of the WSJ this morning. CNBC had five stories on Bitcoin/Blockchain on Friday. Last Monday, Brian Kelly, fast becoming Wall Street’s leading media voice on Bitcoin, put a $25,000 price target on Bitcoin during the Fast Money segment on CNBC (based on getting 5% of gold’s market cap).
Is Bitcoin a bubble? This trader says no and that now is the time to buy_Brian Kelly speaks about how to invest in Bitcoin as the cryptocurrency hits a new high. The "Fast Money" traders weigh…_www.cnbc.com
Surely, the media hype will turn to scorn during the inevitable downturn. Surely, the media hype is a sign of the “bubble”. But I believe that the media’s rapidly rising interest in all things crypto is another sign of pending mainstream adoption.
6. Vitalik Buterin Announces Plasma, to drive interchain operability. There are other projects also addressing interchain interoperability (e.g. Cosmos and Polkadot), but anything Buterin does is of huge import in the crypto world. Interchain interoperability is a major part of the infrastructure necessary to decrease friction in moving assets between blockchains.
Here Are Four Pending Events I’m Following, One Is Imminent, The Others Are More Longer Term
- The Pending Kin ICO Will Dramatically Increase The User Base of Ethereum/Crypto Currency. The Kin tokens will be used to buy services on the Kik messenger platform, which has 15 million monthly active users. Kik will use some of it’s tokens to buy back the $120 million in equity that investors have plowed in to Kik to date. Kik will also gift a certain amount of coins to each user, making it the largest installed base of crypto currency users to date. No date has been set yet for the sale.
- Generally accepted ways to value crypto currency. This is an obvious point, but there is shockingly little written on this topic. The best piece I’ve seen was written by cburniske of Ark Investment Management. Brian Kelly putting a price target of $25,000 for Bitcoin based on 5% of the market cap of gold is at least a framework for thinking about how to price Bitcoin, but it’s pretty thin in terms of rigor. Something as simple as “fully diluted coins” is not even generally well understood, appreciated or reported. CoinMarketCap cap reports the “Market Cap” of Gnosis as $208M. But that’s only counting the 5% of tokens that float. The other 95% are there, just being held by the company. While CoinMarketCap let’s users sort Market Cap via Total Supply, instead of just what’s circulating, circulating is the default mode, and, my guess is, the Total Supply functionality is not known/used by everyone. So, to a large degree, CoinMarketCap, and others are comparing apples-to-oranges in terms of market cap if they don’t include fully diluted numbers.
- Central Banks Start Using Bitcoin or Other Crypto Currency As A Foreign Exchange Reserve. It’s just a matter of time before a central bank starts issuing digital currency, likely tied to it’s own currency. It is also likely we will see central banks start to hold Bitcoin or other crypto currency as foreign exchange reserves, similar to how they hold U.S. dollars or gold. China holds about $3 trillion U.S. dollars as foreign exchange reserve. Japan holds about $1.2 trillion. It will likely be a smaller country like Vietnam that is the first to hold Bitcoin, but it’s coming.
- A comprehensive U.S. regulatory framework. While the recent SEC comments and the SEC Report of Investigation of the DAO tokens provided a modicum or regulatory clarification, the U.S. regulations addressing ICOs remains highly uncertain. Like Uber and AirBnB did when they first launched, most ICOs are ignoring this uncertainty. Some ICOs are addressing the uncertainty by preventing participation from U.S. investors. As I noted above, the Filecoin ICO is notable in many ways, including the solutions devised to attempt to address security laws. But given the uncertainty, some believe these solutions will prove inadequate to regulatory scrutiny. The bottom line is this is complicated, and the SEC and other government oversight bodies will continue to move cautiously (i.e. glacially), which will continue to push much of the activity outside of the U.S..
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