Blockchain Bites: a16z’s Cyclic Crypto Thinking and Grin’s Grim Outlook

FalconX raised an inflation-adjusted equivalent to Facebook’s 2005 Series A, Bakkt has unveiled $600 million in total insurance cover and Andressen Horowitz anticipates another age of growth.

Crypto trading platform FalconX closed a mult-imillion dollar seed funding round led by Accel, a venture capital firm that took a gamble by investing early in Facebook. Looking at these two raises separated by 15 years is revealing. Adjusting Facebook’s 2005 Series A to today’s terms brings it to around $17 million, or the amount FalconX was just handed.

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Unlike Facebook, FalconX doesn’t seem interested in mass adoption. The firm told CoinDesk it has no plans to expand its services to retail investors.

Not Smiling
Grin, the privacy-centric project that garnered outsized interest in investments in 2019, is showing little signs of life. Its price has dropped 20% year to date, while the network’s hash power and mining difficulty have experienced nine consecutive months of decline. Grin launched during an “altcoin bear market,” said grin developer David Burkett. That the price has “so far only moved downward” is a “very similar movement to many coins launched at the same time.”

Bakkt’s Backing
Bakkt has onboarded more than 70 clients for its custody services and given them the option to tap more than $600 million in insurance coverage overall, the company announced Monday. The company has also completed two audits into its financial reporting and customer data protection controls by KPMG and PwC, respectively. 

FalconX’s Facebook-level Raise
FalconX, a cryptocurrency trading platform, announced it has raised a total of $17 million in a round led by Accel, with backing from Coinbase Ventures, Fenbushi Capital and Land Avon Ventures. The platform claims 100 customers as well as an AI-powered trading solution programmed to eliminate artificially inflated prices. CoinDesk’s Paddy Baker puts the raise in perspective by detailing Facebook’s  $12.7 million Series A led by Accel in 2005. “Inflation means Facebook’s raise would now be worth the same as FalconX’s; then again, a pre-seed is two or three raises behind a Series A,” he said. 

Cyclic Thinking
By monitoring 10 years of data – including from subreddits and Github – analysts at Andreessen Horowitz have found that crypto boom cycles progress in roughly five phases. 1) The price of bitcoin and other crypto assets goes up, 2) leading to new interest and social media activity, 3) leading to more people getting involved, contributing new ideas and code, 4) leading to projects and startups getting created, 5) leading to product launches that inspire more people, eventually culminating in the next cycle. With the launch of a new $515 million crypto fund, the venture firm looks bullish on the next cycle of development. 

Testing DEX
Synthetix is putting over $40,000 in crypto on the line to entice users to try out the faster beta of its decentralized exchange (DEX). The test aims to solve the “painful trade-off” between network speed and security that affects DEXs, hinting at a future where these platforms can scale. 

Crypto Long & Short
Mining derivatives are a signal of crypto’s growing sophistication, CoinDesk’s Noelle Acheson puts forward in the latest Crypto Long & Short newsletter, following up on derivatives exchange FTX recent launch of what they are calling “hashrate futures,” based on bitcoin’s difficulty level. “This particular instrument may or may not take off. Its significance is more that it could trigger a new wave of financial innovation that supports the growth and increasing sophistication of the bitcoin mining industry, which is struggling to adjust to reduced revenue and tougher competition,” she writes. 

Derivative Raises
Crypto derivatives platforms have brought in $552 million of institutional-focused capital since 2014, The Block reports. The majority of the fresh capital was raised by two deals involving Bakkt.

Spill the tBTC
A tokenized version aiming to bring Bitcoin onto Ethereum has closed down after two days, its developer Matt Luongo said. Named tBTC, the project is pausing deposits for 10 days, and its creators are helping users withdraw funds. A post-mortem, and possible resurrection, will come from Luongo once the smart contract is empty, he tweeted. (Decrypt)

First Mover
Bitcoin trading volumes are averaging their highest levels since last July, according to Arcane Research, while the number of open bitcoin futures contracts on the CME exchange is rocketing. Such enthusiasm contrasts markedly with the dour outlook of Federal Reserve Chair Jerome Powell and the declining returns on the benchmark S&P 500 (down 11% year to date). “For bitcoiners, the pessimism on the economy was just another reason to be bullish, since it means the Fed is likely to inject more money into the markets, strengthening the case for buying the cryptocurrency as an inflation hedge,” CoinDesk’s First Mover team said in today’s newsletter. Get it in your inbox!

Key Level
Bitcoin’s attempt to scale $10,000 looks to have stalled again. This is the third rejection to cross the psychologically important level since May 1. Dropping to $9,450 during European trading hours, the currency is trading around $9,600 at time of writing, representing a 145% increase since March lows. 

Hash Rates Spinning
Along with prices, Bitcoin’s hash rate has steadily climbed over the weekend, following a post-halving dip. On Sunday the hash rate hit highs of 107 exahashes per second, recovering from a drop to 87 on Thursday, the lowest since December. (Decrypt)

Is bitcoin the answer for a global monetary system not longer served by the dollar standard? Episode 3 of The Breakdown: Money Reimagined examines bitcoin and permissionless stablecoins – both of which are forcing the global monetary system to examine deeply ingrained beliefs. 

The Breakdown: Money Reimagined is a podcast crossover micro series exploring the battle for the future of money in the context of a post COVID-19 world. The four-part podcast features over a dozen voices including Consensus: Distributed speakers Niall Ferguson, Nic Carter and Michael Casey. New episodes air Fridays on the CoinDesk Podcast Network. Subscribe here.