Crypto is Booming! VCs Are Bullish

Well, well, well. To say crypto got the result it wanted in the US election is possibly the biggest understatement since Satoshi suggested picking up some BTC in case it ever caught on. The Orange Man is heading back to the White House while crypto prices set coordinates for the moon. We’re so back.

For all the furore around BTC making a new all-time high; endless memes of Gary Gensler crying; and Cobie reinstating his classic profile pic, it’s worth remembering that some people have been bullish all along. Even in the darkest days of the Biden administration’s war on the industry, some never lost hope.

So credit to the folks at VC firm a16z, whose recent State of Crypto Report 2024 is a bullish thesis that was published before the election. Even though the prevailing sentiment was that whoever won would be good for crypto in the long term, the team who put it together will be feeling pretty vindicated now.

In today’s video, we break down what the a16z team had to say and what it means for the industry going forward. As a new sun rises over the Cryptoverse, let’s remind ourselves why we endured such a long winter and why it’s now time to start catching some serious rays.

You can watch that video here.

📈 Crypto Market Forecast 📈

It might be the autumn, but it’s time to spring forward. For those unfamiliar, spring forward refers to the time change that occurs in March in many countries to adjust for the increasing amount of daylight. Well, the crypto market is about to see a massive spring forward when it comes to announcements, and that’s simply because of the outcome of last week’s US election.

The Republican victories in the House and Senate mean it will be easy for pro-crypto regulations to pass. When you combine this with the fact that SEC chairman Gary Gensler is likely to resign in the not-too-distant future, you have a recipe for things like a spot Solana ETF. As we’ve seen, some asset managers have already front-run this possibility with their applications for such ETFs earlier this year.

In other words, everyone in crypto knows that positive crypto regulations are coming, so why wait until Trump is in office to roll out their products, services, and features? In crypto, the first-mover advantage is massive. From our perspective, the starting gun was Wintermute's tabling of a proposal for the ENA token to capture a portion of Ethena’s protocol fees last week.

For those unaware, making this change creates incredible regulatory risks because it would make the ENA token look like an unregistered security in the eyes of the SEC. But again, the SEC’s anti-crypto chair is almost certainly going to resign, and pro-crypto regulations are almost guaranteed in 2025, so why wait until then to make this change?

Given this fact, it’s likely that we’re going to see a lot of announcements from crypto projects about things they would have never dared to try under the Biden administration. Chances are that most of these announcements will come from Ethereum’s ecosystem this week. That’s just because of Ethereum’s Devcon conference, which will last from today until next Sunday.

Similarly, it would not be surprising in the slightest for US exchanges like Coinbase to start listing significantly more coins and tokens in the coming weeks. This underscores the importance of looking at a crypto’s connections to things like Coinbase Ventures and the Base layer 2. Spoiler: we’ve covered a few of these cryptos for our Coin Bureau Club members.

At the same time, crypto projects belonging to niches that leverage things like crypto payments will likely start to announce integrations that were likewise impossible under the previous administration. GameFi comes to mind here, but it will probably take some time for investors and even the crypto projects themselves to understand the size of the door that’s been opened.

In terms of specific cryptos, the two to watch closely will be Aptos and Sui. This is because they were originally created by Meta (then known as Facebook). As such, it would not be surprising to see one or both of these blockchains integrate with the likes of Instagram. Remember that Instagram once offered NFT functionality. It was removed, but it could return very soon.

Another crypto to watch closely is Solana, and that’s precisely because it has perfectly positioned itself for crypto payments. Consider that PayPal launched its PYUSD stablecoin on Solana for the explicit purpose of payments. Now consider that one of Trump’s biggest backers was PayPal co-founder and CEO Peter Thiel. Peter probably wants some ROI for that support.

On that note, Peter is also a big backer of a new exchange called Infinex which uses DeFi as its backend and uses chain abstraction to provide a user-friendly and familiar front end. It goes without saying that such an exchange would not be possible under the Biden administration. Under the next administration, however, crypto could have almost no restrictions.

This could result in an explosion in innovation, but also a massive increase in risk. TheBlock’s director of research put it bluntly: crime is now legal. Launch the tokens.

🧐 Abstract Decoded 🧐

Warning: The following sentence may sound absurd, even blasphemous, but hear us out.

We’re excited about the launch of a new Ethereum L2 in 2024.

Yes, we already have countless L2s and even L3s. Yes, the native tokens of alternative L1s like Solana, Sui and Aptos have performed better than ETH this year.

But this one is different, we promise.

For the simple reason that it focuses on ‘consumer crypto’ – a sub-category of crypto and blockchain applications that we believe will be the key to unlocking global crypto mass adoption.

If you’re wondering which chain this might be, ladies and gents, we’re talking about Abstract Chain – the new Ethereum L2 network created by Igloo, the parent company of the Pudgy Penguins NFT brand.

In fact, we wouldn’t be surprised if it manages to go head-to-head in popularity with Coinbase’s Base chain among retail crypto users during the bull run.

While Abstract may still be in testnet, we’re hopeful about its potential to disrupt the existing infrastructure leaderboard for three fundamental reasons.

The first is network effects. As stated earlier, Igloo, the company behind Abstract Chain, is also the parent company of the Pudgy Penguins NFT collection. Over the past couple of years, Pudgy Penguins has become one of the biggest intellectual property (IP) brands to come from a crypto background. Many know the brand through its popular social media posts, plush toys, children's books, sports collaborations, and global communities.

Most people attribute this success to the leadership and vision displayed by Luca Netz, the CEO of Igloo who acquired the collection from its creators in 2022 after he suspected they were slowly soft-rugging it out of relevance. Since then, Pudgy Penguins has gone from being just another NFT collection to one of the biggest IP brands in crypto. Data from nftfloorprice shows that Pudgy Penguins is currently the biggest NFT collection by market cap on Ethereum after CryptoPunks and Bored Ape Yacht Club (BAYC).

While some have criticised Luca’s decision to build an L2, we believe it’s actually a pretty smart move for the founder of an established crypto IP brand to take. You see, Luca is playing the long game. Maintaining brand awareness (i.e., familiarity/mindshare) is a costly endeavour: companies need to constantly spend money to keep up brand visibility (i.e., presence on social media). Without a meaningful medium to crowd-source brand value, this becomes a losing battle over the long term.

There’s also no real long-term value accrual for the NFT holders. Rather, they’ve become dependent on Igloo to continue launching new merch for the floor price to go up. Luca seems to have realised that the best fix to this problem was to democratise value generation. In other words, he needed to create a medium that allowed the community to generate their own value for the brand.

To quote Dragonfly’s Haseeb Qureshi, “community is not what you give to your users. It's what your users give to each other.”

This is exactly what Abstract provides to the Pudgy community. If you’re wondering why they can’t just use the Ethereum L1 or another existing L2, then the simple answer is what we’ve said at the beginning – network effects.

You see, there’s greater value to be accrued in the long term from creating semi-closed systems than from building on top of a larger ecosystem. There’s no better example for the success of this model than Ronin – the Ethereum L2 by Sky Mavis, the creator of Axie Infinity.

Sky Mavis’s decision to create the Ronin chain has ensured early Axie players and the Sky Mavis team were able to smoothly transition and maintain the value generated from the success of the game even when Axie no longer holds the same mindshare it did in 2021. It also allowed Sky Mavis to onboard new players who weren’t interested in Axie.

That said, one of the immediate benefits of Igloo creating its own L2 is that it can streamline what the brand stands for by curating the projects built on top of it. In this case, consumer crypto applications.

The second reason we’re bullish is the tech itself, or rather the core tech modules/components. You see, Igloo is creating core modules that can make the adoption of Abstract as seamless as possible for both creators and users. This includes the ‘Overpass IP’ and the ‘Abstract Global Wallet’ (AGW).

The Overpass IP is an IP licensing platform that unlocks transparently and reliably licensing opportunities for IP consumer brands. This will be especially relevant when ‘synthetic artists’ become mainstream. For context, synthetic artists are music and film personalities that exist solely in the digital realm. We’re already seeing the first real potential for such personalities in web3 with the recent popularity of Luna and Truth Terminal - AI agent personalities on X.

As for the AGW, it simplifies the onboarding of new users, especially non-web3 natives, by creating a simple EVM wallet accessible through social login (i.e., email sign-in) or even fingerprint and Face ID on their mobile devices.

The third and final reason we’re bullish is Igloo’s three-phase plan to onboard consumers to Abstract. The three phases are titled, ‘discretionary spending’, ‘necessary spending’ and ‘essential spending’. These titles are a reference to the average consumer’s expenditure of resources on items of varying importance to their day-to-day life.

Phase 1, ‘discretionary spending’, refers to non-essential expenses that enhance lifestyle and leisure. During this phase, Abstract Chain will focus on onboarding applications that are fun for users. These include apps in categories such as gaming, casinos, and creator platforms.

Phase 2, ‘necessary spending’, refers to essential expenses like groceries and services. During this phase, Abstract will focus on onboarding applications that can be used by consumers for practical or more serious purposes. These include apps in categories like defi, e-commerce and payments.

Phase 3, ‘essential spending’, refers to expenses that are fundamental to daily life. During this phase, Abstract will focus on onboarding applications that fundamentally integrate the blockchain into the everyday life of consumers. These include apps that allow users to access banking and insurance, prove their identity, and even vote on the blockchain.

We’re currently in the midst of Phase 1. Abstract has already announced the onboarding of promising projects in categories such as gaming (Onchain Heroes and Duper), NFTs & IP (Canna Sapiens, Tribe3 and Plooshies), memes (Multiplier, Vibe and Zoo)  and betting platforms (Prospect and Swipe Markets).

We suspect there will be many more projects onboarded before mainnet goes live anytime in the next few months. We recommend you keep your eyes peeled.

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🔮 Video Pipeline 🔮

* Pyth vs Chainlink: Which oracle solution has the upper hand?
* Galaxy VC Report Breakdown: Why VC investment is declining in crypto?
* US Treasury Stablecoin Crackdown: Why the US Treasury is targeting stablecoins
* South Korea Crypto Deep Dive: Exploring South Korea’s crypto obsession
 
🏆 What's New at CoinBureau.com This Week? 🏆

* What is Ethereum? The Ultimate Guide to Understanding ETH
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* How to Read Crypto Candlestick Charts?

📖 Quote of the Week 📖

One thing that is clear from the US election is just how much power the crypto community can wield when pressured. The impact of the pro-crypto lobby on this election cannot be overstated. It’s amazing what we can do when we come together collectively.

"[T]he world is more malleable than you think and it’s waiting for you to hammer it into shape" - Bono

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.