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Hello from Friday, I presume that you are currently enjoying the long weekend. In celebration for this week’s Exchange letter we’ll try something new by being brief.
If you are tired of hearing about cryptocurrencies, I have bad news. They are not only not going away, but it appears that the financial cannon that have helped clear the fields for their general advance are reloading with even more financial ammunition.
At least that’s what Eric Newcomer is reporting in a post out this week aptly titled “a16z Crypto Fund Balloons to $2 Billion.”
This raises a few points. First! That there is enough LP demand to fund a crypto vehicle to the tune of $2 billion. Second! That there are enough hot crypto ideas out there worth sticking $2 billion into.
I can entirely believe the former, but the latter stretches my brain a little. Not that there aren’t great companies being built in the blockchain space; Coinbase’s Q1 earnings indicate that you can make money with crypto. But it seems that the firms that have proven the most successful thus far are more a hybrid of the traditional banking world and the crypto space than entirely inhabitants of the latter.
But as those ideas have been mined to increasing perfection, we should anticipate seeing money chase the more experimental crypto ideas. As I noted in the Daily Crunch yesterday, there’s a lot of money already going into those markets:
[Y]ou’ve heard of non-fungible tokens, or NFTs. If you have already digested the NBA TopShot hype wave, buckle in, because a lot of folks are still building in the NFT world. That includes Anima, which is bringing AR to NFTs and just raised new capital from Coinbase, and Infinite Objects, which just raised $6 million to help folks bring their NFTs IRL.
This is where venture investing in crypto — and that mammoth a16z fund — gets interesting.
Sure, crypto exchanges can make money. But what about the further reaches of the crypto economy? Can they build material revenues that the fiat world can understand and go public? (Do they even want to go public?)
It’s a pleasure to watch other people wager other people’s money on ideas that may fail. Heads they lose, tails we win. Not bad!