Welcome to Ploonge Exchange, a weekly newsletter about startups and markets. It is inspired by Ploonge+ column daily where it gets its name. Want it in your inbox every Saturday? Sign up here.
Welcome to the weekend! We achieved. Badly, I guess, given how tired everyone looks on the phone and on Twitter. But we beat workdays all the same, which means we can relax and enjoy ourselves for a minute. Yes, we are talking about cryptocurrencies today. rejoice!
The Race to Fund the Future of Cryptocurrency Sure Is Expensive
I’m impressed with the pace at which Coinbase invested capital at other companies in the larger blockchain market. It’s a smart move, as the US public company can shell out comparatively small amounts (when stacked alongside its revenue base) and buy property and access to information in startups, providing early warning data about what’s coming up. Given that Coinbase is an obvious holder – and guardian, to some extent – in the cryptocurrency market, its investments make sense.
But there are investments, and there are invest. And it looks like the newly announced FTX fund is something more aggressive than what Coinbase has managed, despite its fairly fast cadence of trades.
FTX Fund Crypto Will Total About $2 Billion and, by interviews, can be disbursed just this year. This is a wild pace of investment, perhaps reminiscent of how quickly a16z got its recent $2.2 billion cryptocurrency fund up and running.
Some questions:
- Why does the cryptocurrency market need so much money when its user base is very small compared to the bigger internet?
- Why are we using so much fiat money to finance cryptocurrencies?
These are interconnected questions. They boil down to a simple confusion of mine about why it is so difficult to build useful things in the cryptocurrency market. Coinbase and FTX exist on the fringes of the cryptocurrency world, transporting money back and forth from the traditional economy and what could be its future. That they are investing is smart, but the amount of money they are willing to invest, along with what traditional venture capitalists are also investing in blockchain startups, has me a little confused – what is all this being spent on?
The two main blockchains are established and not new (Ethereum was thought of in 2013 and released in 2015; the Bitcoin whitepaper was released in 2008); stablecoins do exist and have many well and stable players; and a lot of capital went to the NFT markets and some crypto games. Some of which even built modest player bases. But it does seem a bit concentrated when we compare the amount of money flowing into space with what we can see in terms of usable results.
Institutional investor reports that $32.8 billion in total was invested in “crypto and blockchain technology businesses” last year. Perhaps a lot of things built with this money will come out soon and will surprise us, but now well north of a decade after Bitcoin said, “Hello world”, I still don’t use any blockchain-based apps or services. today. Unless I’m messing with a part of the crypto world for research purposes, of course.
And I spend more time online than I care to admit! Perhaps the new FTX fund will bring the mass market blockchain product to the market that is not just another vehicle for speculation. Let’s wait and see, I suppose.