Rear view mirrors

While most crypto currencies have been crashing hard this week, it's been encouraging to witness few high profile tech people keeping the long term focus and openly discussing about which jurisdictions are more likely to become the Silicon Valley of crypto.

It all kicked off with Jason Calacanis' tweet claiming angels can only do “meh to ok” outside of the Valley. Fred Wilson came back pretty hard, ultimately stating how “the most disruptive startups of the last 10 years (BTC $40bn & ETH $20bn) did not emanate from SV”, echoing bits from his memorable post on "Return & Ridicule" (if you haven't read that, delete your account).

If that wasn't enough, the day after he followed up with a post titled “Jurisdictional Competition”, where he succinctly pointed out how the US and Silicon Valley have the most to lose from a crypto-unfriendly local regulatory environment.
 
A secular US tech decadence does not seem far fetched at all, particularly as it's effectively already happening: US VC is now 54% of global VC investment, down from 90% 20 years ago. "where will it be 20 years hence?” Scott Kupor from A16Z asked on Twitter. Our not so wild guess is around 20-30%.

There was more. Matt Ocko, who runs a deep-tech fund from SF, claims that their typical founders do not fit the Silicon Valley cliche and in fact less and less of their portfolio companies every year are based there. Boom.

All this gets exacerbated by the current political context. The Trump administration is clearly going to make it painfully difficult (and unwelcoming) for immigrant entrepreneurs, without which "America will Fall Behind", says Steve Case. Brad Feld picks up on it saying how great this will be for the rest of the world.

It's not hard to spot and extrapolate this trend, is it? Ignoring it is like driving while looking in the rear view mirror.

Going back to crypto, it is a romantic coincidence that Crypto Valley happens to be right at the heart of Europe. Switzerland no doubt has the chance to build onto its regulatory edge and create a thriving world class crypto ecosystem, and Europe will inevitably benefit massively from a healthy pumping heart. But other countries are not just going to be waiting on the sidelines, it's probably not going to be the usual suspects though.

One last thing. While we are hugely excited by the prospects of Europe capturing the hearts and minds of the best entrepreneurs going forward, we also need to be open to the not-so-wild idea that the "next Silicon Valley" won't be geographically constrained and will rather unfold in the cyberspace. That would be totally on theme with crypto. :)

Back on the ETH price, this feels very much like the 2013 bitcoin price deflation.
ETH rose spectacularly in the past months, but this is a long game. It may go down more, and it may take a few years to see it back at its ATH.
But to be honest, we don't really care that much 🤷‍♀️
We're here for the amazing innovation happening in decentralized computing.

The main difference I personally feel today vs the 2013 price hike is that 4 years ago, it was clear BTC was revolutionary and in the future could become important, but it wasn't clear how.

Today, I think it is abundantly clear that the second-wave of blockchain technology is here, and is even more revolutionary than we could have imagined.
Distributed trustless ledgers and global smart computing are here to stay, and we can only imagine what else is coming.

The revolution has started, and it will be decentralized.

Long rant over. Now off to some juicy stuff...

We are tracking all the emergent crypto funds. If you do know of any under-the-radar fund being raised / invested, please share!

We have 38 now representing more than $2B of capital. We will publish as soon as we have some additional research.

$1.5 BILLIONS

Yes, the chart is cumulative. But the number is still staggering. That’s more than all VC investments in the blockchain space in 2015 and 2016 *combined*, according to Tokendata (who will kindly provide us with this chart every month).

At time of writing we are off c. 45% from all time highs, it's been a literal bloodbath this week. To everyone who keeps calling it a bubble, you can stop now as it kind of already popped. Everyone is now wondering how much further it's going to fall. Chris Burniske in his first Medium post argues that even a 75% drop from ATH would not compromise the secular bull market. We also think we may not be quite done yet...and it's actually a good thing: "Run, day traders. Run, speculators. Come, believers. Come, builders."

A potential leading indicator seems to be Tether ($USDT) market cap. As a reminder $USDT is a 'stablecoin' i.e. it's pegged to the value of the U.S. dollar in its reserve fund. While it's price is constantly in the close proximity of $1, its market cap can go up or down as $USDT coins get created when one buys them or destroyed when one sells them. At the time of writing $USDT market cap is at an all time high at just shy of $300m, almost 3x since June 1st. A reddit user suggested that Tether acts as a 'safe harbour' for traders to get into to avoid sharp corrections in other crypto currencies (others are questioning its safety), while implicitly signalling the intention of getting back in during calmer times (instead of cashing out to fiat and perhaps exposing to potential tax liabilities). We are still thinking whether there is any merit in this argument and whether $300m would actually be enough move markets in any meaningful direction, but will keep an eye on it going forward. It could certainly get a lot bigger before getting smaller.

Chaincoin ($CHC) had a great week and despite the correction over the weekend it is still up 5x over last Sunday. And you won't believe why, or maybe you will...This one and the Useless Ethereum Token ($UET) are effectively economic experiments in tribe-building without any particularly sound fundamentals . Just be careful out there! 

Token Economy is curated by Stefano Bernardi and Yannick Roux.

PS: We'll be in Berlin on August 7-8, would love to connect with anyone local who's working on or investing in blockchain technologies. Reach out on Twitter!