| May 20, 2019 | View in browser |
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Today's top reads
- The "smart money" lags
- Forking for free speech
- The cost of the bull
- Binance's IEO incentive
This week's poll: Do you trust crypto media?
Click to answer:
Nope, it's full of shills
Yes, it's fairly accurate
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Market update
| COIN | PRICE | 7-DAY |
| BTC | $7,715.74 | + 3.84% |
| ETH | $243.43 | + 25.07% |
| XRP | $0.386 | + 19.49% |
| EOS | $6.08 | + 10.52% |
| LTC | $88.66 | + 1.10% |
1. The "smart money" lags
It's usually the opposite. Venture capitalists get in early and profit from a booming market. But right now, crypto VC is working differently.
According to crypto-friendly venture capitalist Alex Thorn, the "VC cycle" has lagged bitcoin's price by an average of six months. That means even though bitcoin's price peaked in December of 2017, it took until the second quarter of 2018 for crypto-related capital to reach a record high of $2.4 billion.
But that's not all. Thorn found a few more interesting trends in the data:
- Investors want quality. Though the sheer volume of crypto startup capital has fallen since its peak last year, the median level of each deal has actually risen. To Thorn that means fewer quality deals, but ones that are "extremely crowded."
- Accelerators and angel deals are cold. In a slump to a level that hasn't been seen since before 2017, accelerators and angel investors have cold feet in crypto right now. For that reason, Thorn predicts the industry's seed and early stage deals might take a hit in the next few quarters.
Make no mistake, though. The deal count may be falling alongside total investment but that doesn't mean startups aren't cashing in. Upcoming futures exchange Bakkt raised early in the year at a valuation of $740 million and crypto trading platform Liquid just boasted its unicorn status after its Series C round last month.
The bottom line: Venture capitalists might be avoiding term sheets from the wider market, but that doesn't mean the highly sought after mega deals are really taking a hit this VC cycle.
2. Forking for free speech
Gab is back at it. Last month, controversial social media platform Gab promised its community that it would fork Brave's open source code in an attempt to build its own censorship free browser. The move would enable its community to use its Dissenter extension, without app store intervention, natively.
But even though Brave CEO Brendan Eich trashed Gab for doing it, the train didn't stop there. Now, Gab CEO Andrew Torba is looking at forking all sorts of projects in the name of free speech.
His next stop? Keybase - an encrypted chat platform that just recently integrated a Stellar wallet into its ecosystem. Torba flaunted the possible move in a tweet saying he "can't wait" to fork the project and "swap [the Stellar wallet] out with a Lightning Network wallet."
And it's probably going to happen. Torba told Decrypt that his company is "seriously exploring" the idea as he looks to build out his "free speech software company."
In a nutshell: Gab's becoming much more than the free speech social media network it was just a few months ago. With Dissenter and a possible Keybase fork coming, Gab could become an all-encompassing alternative to Silicon Valley's top tech companies.
3. The cost of the bull
There's always a consequence. In the case of a bitcoin bull market, it's the transaction fees. Back in 2017 during bitcoin's extravagant run-up, fees mooned alongside, hitting almost $40 per transaction for a brief moment.
Though the fees quickly cooled back down to near zero levels for months as bitcoin bummed about, they are now back on the rise. Yesterday bitcoin's average transaction fee hit $4.16 for the first time since January 2018.
And naturally, the fee hike is reheating bitcoin's scaling debate. One user on the subreddit r/Bitcoin explained that now that fees are rising, companies "spamming" the blockchain like VeriBlock can no longer afford to do so. It's just one point of view for the block limit working in action.
In contrast, critics claim that rising fees will essentially make Bitcoin useless as a currency – as the price rises, it becomes increasingly harder and more expensive to spend.
And while scaling solutions like the Lightning Network and Segwit are supposed to save bitcoin users from high fees, supporters are asking for patience while they implement bug fixes before they really make a difference.
4. Binance's IEO incentive
Initial exchange offerings (IEO) are hot. Think about it. It's much "safer" and more "credible" to invest in a project that an exchange has already vetted first. Not only that, but the new funding method has also produced some crazy returns for investors.
Specifically, on Binance, all four IEOs have had wild returns according to Larry Cermak's calculations:
| Project | USD Return | BTC Return |
| BitTorrent | 786% | 277% |
| Fetch.AI | 132% | 12% |
| Celer | 141% | 22% |
| Matic Network | 615% | 393% |
Why wouldn't they though? Binance has every incentive to make these new tokens pump. From trading fees, our quick math estimates that at a 0.1% trading fee the IEOs brought in close to 354 BTC this week alone. Not too bad for four IEOs.
More than that, investors have to allocate Binance's very own BNB token to the sales if they wish to participate - an incredibly clever way to add value to the token's already criticized model.
At this point, it feels like Binance could launch a token that they say is 100% useless and people would still buy in.
5. You should also know
- Blockchain.com has disabled BSV trading pairs on its platform.
- Bitcoin had its very own spotlight on 60 Minutes last night with input from controversial crypto influencer Charlie Shrem.
- Kik's CEO has revealed that SEC negotiations about a possible unregistered securities sale have cost the firm over $5 million.
6. Ditch the forks you say
From last week's poll, 75% of respondents answered that they sell off their bitcoin forks.
Did you know? There are over 100 bitcoin fork projects including some outrageous names like Bitcoin Lambo, Bitcoin Pizza, and even Bitcoin Holocaust.
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