Crypto News: June 13, 2018

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Reports have surfaced that Justin Sun, the founder of TRON, acquired BitTorrent.

This specific acquisition isn’t overly interesting to me, but the larger trend is worth watching. Young crypto companies & founders are highly capitalized and will begin looking at acquisition targets of legacy assets. These acquisitions will be pursued for one of three reasons:

  1. Gain control of legacy infrastructure - The crypto community has long been the underdog in finance & technology. This led to the “us vs them” mindset that is so prevalent. Teams realize that the incumbents have valuable infrastructure, headcount, cash flows, licenses, and/or relationships. Rather than spend the time, energy, and resources to acquire these advantages themselves, crypto companies will use their large capital bases to conduct strategic acquisitions.

  2. Take out the competition - this strategy allows upstart crypto projects to gain control of competitors and potentially shut them down. This is the modern version of the corporate raiding that occurred in the 1980s and 1990s - cheap capital flooded a market and empowered teams to go after competitors and/or trophy assets. The first hostile takeover attempt by a crypto company will not only draw headlines, but also strike fear in the minds of many incumbents.

  3. Vanity purchase - Entrepreneurs have a level of confidence that makes it possible to build successful companies against the odds. The confidence comes with ego, big dreams, and a determination to achieve what they want. These traits are advantages when building companies, but can be detriments in other aspects of life. Either way, expect to see teams and founders with newfound wealth to put the capital to work in an effort to acquire assets that they want to own, regardless of the inherent value or strategic nature. (This is likely what happened with BitTorrent IMO).

This theory is quickly becoming less academic and more practical. In the last few months, we have also seen Coinbase and Templum acquire numerous legacy financial firms to gain licenses (ATS, BD, RIA, etc). The acquisition decisions are mainly driven by time - it is almost always faster to acquire existing licenses than apply for new ones.

It will be interesting to watch this trend play out over the next 12-24 months. I’m personally most excited about the head-to-head battle between large crypto exchanges (Coinbase/Circle/etc) and the existing traditional finance exchanges (NYSE/NASDAQ/etc). Competition is good, but consolidation is inevitable.

The question is: Who is best positioned to acquire who?


THE RUNDOWN:

Coinbase will add Ethereum Classic to its exchange: Coinbase announced plans to add Ethereum Classic (ETC) to its service “in the coming months.” Ethereum classic is the 18th largest cryptocurrency by market capitalization – valued at more than $1.5 billion. However, it’s one of the largest by volume (ranking in the top five). Read more.

Apple blocks crypto mining apps on its products: Apple has banned any crypto-mining apps that might be used on its mobile products. The reasoning behind this change seems to be connected to Apple's policies on hardware compatibility. Read more.

A crypto mining company is listing on the London stock market: Cryptocurrency mining outfit Argo Blockchain will likely become the first blockchain company to list on the London Stock Exchange. After launching its subscription service for mining contracts the same day, the company says it plans to hold an IPO, following a $2.5 million funding round it completed in January of this year. Read more.

Financial services industry spends $1.7B on blockchain: Financial services companies are spending about $1.7 billion annually on distributed ledgers. Banks and other companies are moving beyond the proof-of-concept stage to commercial distributed ledger technology products. The budgets spent on blockchain increased 67% last year. Read more.

The EU wants to hear your questions about blockchain: The EU Blockchain Observatory and Forum announced through a tweet on Monday that it is hosting a 90-minute AMA (Ask me anything) session on June 18, to address any concerns from the public about blockchain and the organization's future plan in the emerging space. Read more.

German government says crypto does not threaten financial stability: Representatives of the German Federal Government have stated that cryptocurrencies do not pose a threat to financial stability. Nevertheless, the government sees the need for regulatory measures to control digital currencies. Read more.