How Did Nobody Notice This?

The American-centric world order is starting to fracture and many believe that a new chapter in history is beginning. The West has held sway over the Rest for centuries, but now the Rest are becoming more assertive and more confident, with the BRICS countries signalling a shift in the global order.

If you’ve been keeping up with the news around the BRICS, then you’ll know that there has been plenty of speculation that they could be looking to launch their own currency to challenge the US dollar’s hegemony. This currency has yet to emerge, but a massive step was recently taken towards its creation - and virtually no mention of it was made in the media.

The central banks of a number of countries, some part of the BRICS and some aligned with them, recently unveiled a new payment system. What’s remarkable is that not only is it intended to rival the SWIFT system that helps make the dollar so powerful, but also that it's based on Ethereum. The long-term geopolitical implications of this cannot be understated.

In today’s video, we lift the lid on what this new system is, how it works and what it means for the world and global markets. It will get you up to speed with what could end up being one of the most significant financial developments of the century so far.

You can watch that video here.

📈 Crypto Market Forecast 📈

It’s been a sunny week for the crypto markets and it looks like the weather is about to get a lot hotter. For starters, Joe Biden may reportedly be dropping out of the presidential race. This is likely to be a bullish catalyst for the crypto market, as it’s possible that the Democrat candidate for president nominated in August will be pro crypto. At the very least, they won’t be anti-crypto to the point that they’re vetoing bi-partisan bills.

At the same time, Republican presidential candidate Donald Trump will be speaking at the Bitcoin Conference in Nashville later this week. Many crypto media outlets have rightfully pointed this out as being a watershed moment for the industry. More importantly, it could be the catalyst that brings new and old retail investors rushing back to crypto. Take note.

Throughout the week, the US government will also be releasing significant macro data, including jobless claims, the initial Q2 GDP print, and the PCE inflation figures, which are the Fed’s favourite. Depending on how the numbers look, they could increase (or decrease) the chances that the Fed will cut interest rates. Given recent trends, the data will likely be supportive of cuts.

But that’s just the macro.

On Tuesday, the spot Ethereum ETFs will finally begin trading. Considering the bullish backdrop (Biden bowing out, Trump doing a pro-crypto speech, macro data being supportive of cuts etc.), it’s quite likely that ETH could surprise to the upside on the back of unexpectedly strong ETF inflows. We will be doing an Ethereum ETF update on Tuesday, so stay tuned.

The most surprising part of all, however, could be how Ethereum-adjacent cryptos react. Obviously, layer twos will probably see significantly larger gains than ETH in percentage terms, if the spot Ethereum ETFs exceed expectations. What’s less obvious, however, is how much Ethereum NFTs could rally on the news. It seems that most Ethereum NFTs have bottomed in ETH terms. Now consider that Trump will be releasing a fourth NFT collection in due course.

When you combine these factors (spot Ethereum ETFs, Trump at the Bitcoin conference, and then launching another NFT collection), it seems plausible that the NFT niche could see an epic rebound, and not just on Ethereum. In fact, executives in the NFT industry insist the sector is due for a comeback. It’s possible that it will begin this week.

But wait, there’s more!

As Bloomberg ETF analyst Eric Balchunas pointed out, the listing of the spot Ethereum ETFs will open the door to other altcoin ETFs, most notably for Solana. This really scratches the surface of just how much of a watershed moment the spot Ethereum ETFs could be for the markets in general. Who in their right mind would ever go through the IPO process again?

Any company paying attention would realise that the best way to bootstrap their operations and list on exchanges would be to create a non-profit foundation somewhere overseas, raise a bunch of capital by launching a token, decentralise the crypto project once it’s completed, and then have the token list on exchanges as an ETF. This will change the markets forever.

But that’s a topic for another time…

✅ Starting Problems ✅

A company’s growth strategy is one of the most important things that determines its success, especially in its early stages. Put simply, a growth strategy is a company’s plan to attract users and retain them.

Until recently, the only ones that needed to bother learning/understanding growth strategies have been founders and early-stage start-up investors (angel investors and VCs).

However, in web3 - where ‘companies’ are early-stage tech products with tokens that trade on ‘speculative financial markets’ easily accessible to the average Joe – understanding a project’s growth strategy has become relevant to a group of stakeholders larger than those in web2.

Especially since these very tokens are often at the heart of its growth strategy and any resulting success is often directly reflected in the price of such tokens.

That said, today’s column will focus on giving you a glimpse into what makes a good growth strategy, some of the common problems, and how this all pertains to crypto.

Let’s begin, shall we?

In the start-up world, there is a saying that often gets thrown around when talking about choosing a growth strategy. It goes as follows: “first-time founders focus on product; second-time founders focus on distribution.”

This phrase first made its appearance in a tweet back in 2018 by Twitch founder Justin Kan.

Since then, more founders (including first-timers) have consciously focused on finding or building a distribution network for their products. This usually takes the form of digital and referral marketing.

However, as more founders have realised, approaching ‘product’ and ‘distribution’ as siloed concepts tends to create an incomplete picture that results in unsustained growth. A good distribution strategy with a poor product will result in a barely profitable (if not unprofitable) company with a huge churn rate of users/customers. Conversely, a good product with a poor distribution strategy will usually result in the company running out of resources before ever reaching adoption and profitability.

Clearly, there is a need for cohesion between the two. When that is achieved it usually results in a good retention of users. This is especially relevant for ‘networked products’ – products whose primary growth driver is determined by ‘number of users’ rather than ‘utility’ or ‘revenue generated.’

The growth strategy for these networked products also focuses on incorporating and building a third ingredient called ‘network effect.’ A network effect is a phenomenon where the value of a product or service compounds as more people use it. The difficulty in gathering the first users for such networked products is usually the hardest part of the product life cycle.

In fact, Andrew Chen, a general partner at a16z - one of the largest venture capital firms in the industry - wrote an entire book about this issue, calling it ‘The Cold Start Problem.’

Why is this relevant?

Well, a lot of the projects within crypto are in fact networked products. While this is especially true for consumer-facing applications, it is also true for crypto infrastructure projects.

For instance, for any layer one or layer two chain to prosper, it needs to attract a good set of developers, who in turn build good applications that attract a good number of users, who then bring liquidity. This ends up attracting more developers and so on.

This network effect is the main reason why over 60% of the TVL in DeFi is present on one chain – Ethereum.

That said, the presence of ‘token incentives’ allows networked products in crypto to bypass the cold start problem with much more ease than their web2 counterparts. If you don’t know what we’re talking about, think about all the ‘airdrops’ and ‘points programs’ you’ve seen come up in the past few months. These are simply token incentives to bring in a wave of users.

While this has clearly been an effective growth strategy, it also appears to have created a new growth problem almost unique to crypto.

As more and more airdrop farmers and investors are realising, the tokens of these projects often experience a down-only price action after the incentive program ends. This is due to a large number of the product’s users having no real incentive to stay engaged with the product or its token.

As Delphi Digital points out in their recent report, projects like zkSync have been showing signs of a slowdown in transaction activity since April, even before the snapshot had been announced. With a significant rise in the number of projects offering incentive programs, the time spent by users on each of these products is getting shorter and shorter.

Mason Nystrom, a junior partner at Pantera Capital, calls this ‘The Hot Start Problem.’

Essentially, according to Nystrom, projects that use token incentives to bootstrap users have a limited window of time to find product-market fit and gain enough organic traction such that the startup can retain users/liquidity as token rewards diminish.

He notes that the hot start problem is usually favourable to the cold start problem in only two scenarios. The first is when crypto projects are competing in red ocean markets (markets with a high degree of competition and known demand), while the second is when the products using token incentives have passive user participation.

This includes activities where users have infrequent or less active engagement with the project itself. For example, staking, providing liquidity, and running hardware (e.g. DePIN). Since the level of participation is minimal, users would prefer to stay on as long as the rewards offered are at par (if not slightly better) than those offered by competitors.

However, projects that launch token incentives for active user participation, such as GameFi and SocialFi projects, would arguably have a better chance with going through the cold start problem rather than the hot start problem. This isn’t to say these projects are doomed if they choose to take a shortcut via token incentives, rather that the effort needed to stay afloat after is just that much higher.

An example of a GameFi project that has seen reasonable success after going through the hot start problem is Pixels – a farming game in the Ronin ecosystem. Data from Footprint Analytics reveals that the daily active users for the game have risen back close to previous highs after experiencing a brief dip in May following the end of its Season 2 airdrop.

That said, if you’re serious about long-term investments, you should now have a better idea of why it’s important to analyse projects from a growth perspective instead of simply YOLOing your funds into the hottest narrative.

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🔮 Video Pipeline 🔮

* Ethereum ETF Update: What’s goin on?
* Digital Euro: Time to panic?
* CMC Report: How is the outlook for 2024?
* Government BTC Holdings: Everything you need to know!
* BIS Report: Startling revelations!

🏆 What's New at CoinBureau.com This Week? 🏆

* What Are Yield-Bearing Stablecoins? The Next Big Thing in DeFi!
* Beginner's Guide to Decentralized Autonomous Organizations
* Trezor Safe 5 Review 2024: Safe Hardware Wallet?
* Hedera Review 2024: Third-Generation Blockchain Network

📖 Quote of the Week 📖

Over a long enough period of time, fundamentals will be borne out. However, that period of time can be much longer than you anticipate.  

“Markets can remain irrational longer than you can remain solvent” - Warren Buffet

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.