BlockFi raises $30M Series B

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.


To investors,

BlockFi has announced a fresh $30 million of funding for their Series B this morning. It was led by Valor Ventures, along with material participation from the team at Morgan Creek and a number of other existing investors.

Flori Marquez and Zac Prince

This funding comes approximately 6 months after BlockFi announced their $18M Series A funding round. While this may seem like a quick new round of funding, there are a number of important details to pay attention to:

  1. BlockFi’s Series A was announced after they had already raised the capital and begun putting the money to work.

  2. BlockFi’s revenue has increased by more than 20x in the last 12 months.

  3. BlockFi’s annualized revenue run rate has doubled in the last 45 days or so.

  4. BlockFi now has more than $650 million in assets under management on the platform.

  5. BlockFi’s current headcount is approximately 75 people and they are looking to increase to 125 - 150 people in 2020.

The company currently offers three products on their platform — US dollar loans against crypto collateral, interest-bearing deposit accounts, and a cryptocurrency exchange. They have also told clients that they will be launching a credit card this year that pays 1.5% - 3% “cash back” in Bitcoin, rather than cash or reward points.

The interesting part is that not all of these products require someone to buy or use Bitcoin or Ethereum though. You can take fiat US dollars, digitize them into GUSD or USDC, and then deposit them into the interest account and receive 8.6% APY right now. Think about that. Most people are earning 1.5% or less on their money market accounts and 0.05% or less on their deposit/savings accounts in the legacy system. But if you use digital dollars, you can earn 8.6% APY.

This is the future of a global financial system.

The products are exciting and people obviously find them valuable. I am most excited about BlockFi though because of the team. Flori and Zac continue to execute at a very high level and they understand the most important part of building a business — build something that people want.

Not very many teams have been able to raise tens of millions of dollars in the last two years of the crypto industry. BlockFi has ambitious plans and now they have the capital to position themselves to capture the opportunity in front of them. It will be fun to watch them continue their journey to building essential infrastructure for this new digitized world.

If you’re interested in signing up for a BlockFi account, you can use this link and they will give you some free money as a bonus: Click here to sign up for BlockFi account

Onwards for BlockFi! And onwards for Bitcoin and the crypto industry!

-Pomp


This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.


THE RUNDOWN:

BlockFi Raises $30 Million in Funding: BlockFi Inc., a crypto trading and lending platform, raised $30 million in its second round of financing, led by funding from Valar Ventures, a Peter Thiel-backed venture fund. The Jersey City, New Jersey-based company plans to use the proceeds to increase staff and work on additional products, some of which are already under development. Read more.

Ramp, a Corporate Credit Card Provider Raises $25 Million: A new credit card startup is taking aim at American Express and other stalwarts that have long dominated corporate expense accounts. Ramp, a New York-based fintech firm whose founders sold their last venture to Capital One, has raised $25 million and signed up nearly 100 businesses to its card, the company announced Wednesday. Ramp declined to disclose its valuation, but Keith Rabois, a partner at Founders Fund who invested in the company and now sits on its board, said the number is well below $1 billion. The startup's investors also include BoxGroup, Coatue and Conversion Capital, among others. Read more.

Wells Fargo Invests $5M in Startup Connecting Crypto Exchanges and Banks: Banking giant Wells Fargo is backing blockchain forensics firm Elliptic. The fresh $5 million from Wells Fargo Strategic Capital brings Elliptic’s Series B up to a total of $28 million. The investment is partly geared toward a recently launched product that helps crypto exchanges win banking relationships, Elliptic said. The product, Elliptic Discovery, provides a bill of health for over 200 crypto exchanges worldwide, covering everything from how they conduct know-your-customer (KYC) checks to whether they’re regulated in the first place. Read more.

IRS Refused to Clarify That Its Crypto Tax Guidance Isn’t Binding, US Watchdog Says: The Internal Revenue Service (IRS) should – but won't – clarify how taxes are levied on cryptocurrencies and cryptocurrency transactions in the U.S., the government’s top auditing institution said Wednesday. The Government Accountability Office, a U.S. Congress watchdog, published a report in response to a request from Rep. Kevin Brady (R-Tex.), evaluating the IRS’s existing approach and public guidance surrounding cryptocurrencies.Read more.

US Military Contractor BAE Systems Wants to Hire ‘Cryptocurrency Exploiters:’ One of the world's largest defense contractors is seeking "cryptocurrency exploiters" to support a client based in Washington, D.C. As advertised on LinkedIn, BAE Systems, McLean, Va., is searching for candidates who can "demonstrate proficiency in cryptocurrency" and can move to the Washington metropolitan area to "support a client’s operational requirements." Read more.


Uploads 2f1581459492550 0jod5ah6lnlv cba73b6bd79df88473207ae65c75d971 2frich%2bgreenfield.png?ixlib=rails 2.1

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Rich Greenfield is a Co-founder and Partner at LightShed Partners. He is widely considered one of the best TMT analysts on Wall Street. This episode is special because Rich covers a range of topics, while sharing his perspective as an investor, an analyst, and an entrepreneur. People are already saying this is one of their favorite episodes in a long time, so highly recommend listening!

In this conversation, Rich and I discuss:

  • New media models (Barstool, The Athletic, Substack)

  • Streaming wars (Netflix, Disney+, Hulu, etc)

  • Music platforms (Spotify, Apple, Prime)

  • Where political advertising goes if cable bundles become less popular

  • How Lightshed thinks about Twitter, TikTok, and Quibi

  • The media’s war on time and attention

I really enjoyed this conversation with Rich. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE


Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

  1. TaxBit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. Get 10% off your tax plan today with a free trial by going to www.taxbit.com/invite/Pomp

  2. Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

  3. BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

  4. Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

  5. Travala.com is the world’s leading blockchain-based travel booking platform trusted by thousands of customers worldwide as their preferred online travel agency. The Travala.com platform currently offers 2,000,000+ properties in 230 countries with prices up to 40% cheaper than mainstream travel booking platforms.


If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.


The Psychology and "Magic" of Bitcoin

This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.


To investors,

Bitcoin continued to increase in USD value over the weekend and eventually eclipsed the $10,000 threshold for the third time in the asset’s history. The first time was in 2017 when the digital currency went from $10,000 to an all-time high of ~ $20,000 in just 18 days. The second time was in the middle of 2019 when Bitcoin was on a meteoric rise from approximately $3,500 to almost $14,000 in a matter of weeks. 

Although this is the third time Bitcoin has crossed $10,000, it feels much different than the prior two times. Each of the past events were during hyperbolic growth in the asset price. The $10,000 milestone was merely a blip on the radar as the digital currency shot higher. That isn’t what is happening this time. Bitcoin has been trading between $7,000 and $9,000 for the last few months. It has slowly been grinding up higher and higher. There isn’t a parabolic growth trajectory this time. It feels much more sustainable. It feels more natural. And it leads me to believe that $10,000 will end up meaning a lot more this time, than it has in the past. 

Image result for bitcoin magic

Regardless of the sustainability of Bitcoin’s appreciation, there is something psychologically magical about the five figure number. It is a nice round number. It adds another zero to the price. There is a sense of excitement that comes with $10,000 Bitcoin. Quite literally, people are willing to spend $10,000 to purchase a single Bitcoin. That would have been nearly impossible to fathom eleven years ago when Bitcoin was released to the world.

But $10,000 is still 50% lower than the all-time high price in USD terms. So should people really be excited about crossing over $10,000 again? While some may disagree, I think it is an important milestone. It is also not the only data point that paints a positive picture. We are heading into the 2020 mining reward halving, which will create a shock to the incoming monetary supply. People will likely be bullish going into that event at the end of April or beginning of May. The Bitcoin price is likely to rise as we get closer. 

Don’t be fooled though. Bitcoin is an overly simple concept — there is an artificially fixed supply to the asset and as long as demand continues to increase, then the price of one Bitcoin will have to continue to rise. This will remain true as long as supply and demand economics remains valid. 

The simple thesis requires an individual to accept two core assumptions. The first is that Bitcoin’s code will continue to execute as designed. There will be no 51% attacks that are successful. There will be no downtime on the network. There will be 1,800 Bitcoin created and dispersed to miners every 24 hour period until the upcoming halving. The post-halving mining reward will drop to 900 Bitcoin per day. Each of these falls under the “supply side assumptions” in the Bitcoin bull case.

The “demand side assumption” is that demand will continue to increase. There are two key components to this assumption — one is quantitative and one is qualitative. The quantitative assumption is that as more people learn about Bitcoin, there will be some percentage of those people that will opt-in to owning Bitcoin. This leads to a measurable increase in Bitcoin demand. There are plenty of people who have beat this horse dead, so I won’t waste time on the mathematical models today. The qualitative argument is around the continued chaos, political instability, and economic uncertainty in various geographies around the world. Whether it is countries like Venezuela, Iran, North Korea, and Argentina, or it is in the United States, China, Russia, and India, there is enough issues surfacing to suggest that the trend won’t reverse any time soon. 

So if the supply side assumption (Bitcoin continues to work) and the demand side assumption (demand will increase) are accurate, the US dollar price will rise over time. Each of us should be hoping for that price increase to happen slowly and steadily. If we have the parabolic price increases, they are unlikely to be sustainable. The deep 80%+ drawdowns in price usually follow the rapid increases. Even though the price grinding up is more healthy, I don’t think it is going to play out that way. Markets are too irrational. Humans ultimately make up these markets and humans are incredibly irrational, emotional, bias, and greedy.

As Bitcoin has crossed $10,000, many people are reporting on Twitter and in private conversations that friends and family are starting to reach out about Bitcoin again. They are asking how it works. How they can purchase some. Inquiring whether the recipient of the question thinks now is a good time to get exposure to the digital currency. All early signs that we are heading into another bull market. A market that will probably look and feel similar to past bull markets for Bitcoin.

This time the numbers will be bigger. The volatility will feel greater. But it won’t be much different on a percentage basis. The upside is asymmetric. As price starts to rapidly increase, more people will become interested. They will start to buy Bitcoin. The price will accelerate even more. Which will lead to more people buying the asset. Rinse. Repeat. 

During the height of the 2017 bull market, Coinbase was seeing 100,000+ people sign up every day. It wouldn’t shock me if this number ends up being 1,000,000 people per day in the height of the 2021 bull market. Notice that I said 2021 and not 2020. That is because the actual top of the parabolic rise in price will be approximately 18 months after the halving in my opinion. It won’t be immediately after. It won’t be 3 years later. The 2021 calendar year will bring the big fireworks. 

So $10,000 Bitcoin price is an important thing to pay attention to. This is exactly what you would expect to happen going into the halving. We have about 22 months to watch if the rest of the bull market / parabolic growth cycle plays out. The big thing is that people need to be patient. They need to have a low time preference. Put together a financial plan. How are you going to buy Bitcoin (daily? Weekly? Monthly? Quarterly? One time only?)? What is your plan to sell and go back to fiat currency? Do you plan to ever sell? Will it be all at once or will you dollar cost average in and dollar cost average out? 

Your plan doesn’t need to be perfect. And your plan can change in the future. Just don’t go into a potential parabolic growth period with zero idea of how you are going to manage your wealth. There are a lot of people who got burned in 2017’s bull market. Even though the asset went up ~ 20x in a single year, many people still lost money. Be responsible. Be prepared. And make sure you know what you are buying and why you are buying it. 

This weekend was exciting, but it will pale in comparison to the emotion and frothiness of the future bull market if Bitcoin’s promise is realized. Thankfully, there is more education available for people today. There is better infrastructure in place. But as we all know, Bitcoin is an animal unlike anything the finance world has ever seen before. When it is ready to move, it can melt people’s faces off. 

22 months is a short period of time, but it can also feel like an eternity. Frankly, I am just glad that we are all on this journey together. 

-Pomp


This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.


THE RUNDOWN:

CFTC Asked to Provide Opinion in SEC Case Against Telegram ICO: A U.S. judge has asked lawyers from the Commodity Futures Trading Commission (CFTC) to provide an opinion in the case brought by the Securities and Exchange Commission (SEC) against Telegram's $1.7 billion token sale. On Thursday, Judge Kevin P. Castel of the Southern District of New York issued an order inviting the CFTC's office of the general counsel "to express its views on the issues presently before the Court." The opinion can be submitted in writing, the judge said. Read more.

Fearing ‘Currency Struggle,’ Japanese Politicians Want G-7 Response to China’s Digital Yuan: Japan should prepare to issue digital currencies and propose bringing up the topic at this year’s G7 meetings to counter China’s move toward issuing a digital yuan, a group of ruling party lawmakers said on Friday. The group will present the proposal to the government next week, its leader Akira Amari, a Liberal Democratic Party (LDP) heavyweight and former economy minister, told reporters. Read more.

Now More Than Ever, SEC Is Scrutinizing Unregistered Token Offerings: News about initial coin offerings is back with a vengeance. Only this time, it's not about how much money there is to be raised, but how much money there is to be paid back. In January, two new ICOs completed in 2018 were charged by the U.S. Securities and Exchange Commission with fraudulent sales of unregistered digital asset securities. Read more.

Paystand Raises $20M to Be Blockchain-Based ‘Venmo’ for Commercial Payments: Paystand, a platform using blockchain technology to automate commercial payments, has raised $20 million in Series B funding. Backing the round are a number of VC firms including DNX Ventures, Battery Ventures, Epic Ventures, Commerce Ventures and Wildcat Ventures. Existing investors Leap Global Partners and BlueRun Ventures also took part. Paystand aims to makes complex commercial transactions and payments "as easy and fast for enterprises as Venmo has done for basic consumer-to-consumer transactions.” Read more.

Chinese Insurance Firms Use Blockchain to Process Coronavirus Claims: Insurance firms in China use blockchain to manage coronavirus-related claims amid the outbreak. English-language local news outlet South China Morning Post reported on Feb. 9 that this month Chinese online mutual aid platform Xiang Hu Bao added the coronavirus to the illnesses eligible for the maximum one-time payout of around $14,300 (100,000 yuan). Read more.


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Meltem Demirors is the Chief Strategy Officer at CoinShares, a digital asset management firm that provides professional-grade tools and services for investors. She consistently has some of the most interesting perspectives across the crypto industry, while also having significant experience applying her theories and ideas in the real world through building one of the leading asset management firms. This conversation was lengthy and touched on a multitude of topics. Highly, highly recommend this one!

In this conversation, Meltem and I discuss:

  • CoinShares

  • Tesla

  • Central bank digital currencies

  • Barstool Sports

  • The shitcoin waterfall

  • Politics

  • The average age of regulators

  • Pensions and retirement funds

  • Venture/macro markets & how crypto may connect them

  • What the wealthy elite do to control the government

I really enjoyed this conversation with Meltem. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE OFF THE CHAIN PODCAST HERE


Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

  1. TaxBit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. Get 10% off your tax plan today with a free trial by going to www.taxbit.com/invite/Pomp

  2. Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

  3. BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

  4. Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.


If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.


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