Crypto Global
By Aidan Ryan Welcome back!
These days it seems like crypto venture capitalists can't stop talking about blockchain infrastructure. But that doesn't mean everyone is all in on the idea.
Many VCs have been pulling back from flashy consumer startups following the blowup of FTX, favoring safer bets on software that helps power the back end of blockchains. But Alok Vasudev, co-founder of venture firm Standard Crypto, says now is the time to take risks on the next wave of consumer adoption.
"If you think about the blockchain infrastructure as the roads that we have, we have enough roads, we need destinations," Vasudev told me on Tuesday.
Vasudev said blockchain gaming, decentralized social platforms and blockchain-based music services are three areas where he and his firm are interested in investing. Standard Crypto has already backed startups like decentralized social platform Farcaster, blockchain music startup Audius and blockchain gaming company Limit Break, though those investments came before the collapse of FTX.
Since FTX fell in November 2022, Standard Crypto has invested in firms like Mino Games but also M^ZERO Labs, which builds decentralized governance software. (The M^ZERO investment is a sign that Standard Crypto hasn't entirely sworn off infrastructure startups.)
"The opportunity to define the narratives of the next cycle are going to come from those that are courageous enough to take a stab at what are we going to use these blockchains for, not just how do we make them slightly better, faster, cheaper," Vasudev said.
Of course, the big question is how to find startups that can break through to the masses. Gaming, for instance, has seen relatively limited adoption. In October, Vasudev told me that successful entrepreneurs in blockchain gaming need to understand crypto as well as what makes for a compelling game.
"Now it's about putting the pieces together in the right way, thinking about what elements of that are worth keeping, what are worth discarding, what new can we add to the mix," Vasudev told me this week.
Coinbase has been in the headlines in recent weeks for its battle with the SEC. Regulatory drama aside, how's the company's business holding up?
Crypto prices have been on a tear this year, with bitcoin gaining 71% in the first quarter. But while higher crypto prices generally mean more trading activity, on-chain data shows that trading volume at Coinbase was roughly flat during the first quarter of 2023 compared to the fourth quarter.
Data from crypto research provider Kaiko shows that Coinbase saw $143 billion in trading volume for the first quarter, slightly less than the $145 billion that the company reported for the fourth quarter. Coinbase reported $322 million in fourth quarter trading revenue, so the latest volume suggests a similar haul in the first quarter. But Coinbase will likely still be a far cry from the first quarter of last year, when it had $309 billion in trading volume and $1 billion in transaction revenue.
Coinbase earlier this year forecast non-trading revenue of as much as $325 million in the first quarter, which would top both fourth quarter and the same quarter a year earlier. The exchange's subscription and services revenue, which includes its staking business as well as interest income the exchange gets on customer reserves of the USDC stablecoin, has benefited from rising interest rates.
But the supply of USDC in circulation dropped around 23% from early March to the end of that month when Circle, the crypto payments firm that issues USDC, disclosed it had billions of dollars of reserves at Silicon Valley Bank. A smaller pool of USDC means less interest revenue for Coinbase, though the impact is likely to be relatively muted given the SVB blowup happened late in the quarter.
We'll get more details on Thursday, when the company reports first quarter results. Coinbase executives could also shed more light on how to think about the company's overseas push—including its launch of popular perpetual futures products—and how that will help its business going forward.
"Let's fast forward to the 2020s. I'm not talking about Biden versus Clinton or generative AI versus the internet or Taylor Swift versus the Spice Girls. Though there may be some things on which Taylor and I agree," Securities and Exchange Commission Chair Gary Gensler said in a speech before the Managed Funds Association on Tuesday.
While Gensler didn't mention crypto at all in his speech, he likely was nodding to Taylor Swift turning down a sponsorship deal with FTX last year. In an interview with crypto news site The Block, the attorney Adam Moskowitz—who is suing FTX's celebrity sponsors on behalf of a group of customers—said Swift had asked the company whether it was selling unregistered securities. Gensler has been outspoken in his belief that most tokens are unregistered securities, a key regulatory distinction the SEC has used to crack down on crypto
- Zodia Custody, a digital asset custodian, raised a $36 million round from Japan-based financial services firm SBI Holdings and SC Ventures, the venture arm of Standard Chartered.
- Tristero, a crypto startup that is building a "dark pool" to facilitate large, private trades, raised a $4.8 million round co-led by General Catalyst and SteelPerlot.
- Is the Federal Government Trying to Kill Off Crypto? (New York)
- While Binance battles regulators, its $9 billion VC arm keeps growing (The Block)
- F.B.I. Searches Home of Top FTX Executive (The New York Times)
Thank you for reading the Crypto Global newsletter. I'd love your feedback, ideas and tips: aidan@theinformation.com.
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Aidan Ryan is a reporter for The Information, covering crypto. He is based in New York and can be found on Twitter @aidanfitzryan.
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