😟 Why Crypto Startups Fail

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Good Morning,

The bear market continues. Nansen laid off 30% of its staff, MoonPay executives reportedly cashed out $150M via secondary markets in 2021, and Coinbase is pounding on America’s future as a global technology leader.

In Today's Email:

• What Matters: Binance considers banking collateral 🏦

• Case Study: 4 reasons why crypto startups fail 😟

• Governance & Features: DAI savings rate increase 📈

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WHAT MATTERS

Binance Considers Keeping Collateral at Banks

State of play: Binance, the world’s largest crypto exchange is considering allowing institutional clients to store collateral in banks to help reduce counterparty risk.

• Swiss-based FlowBank and Liechtenstein-based Bank Frick are being considered as potential intermediaries for the service.

• FlowBank clarified that their license does not encompass cryptocurrency trading activities, while Bank Frick declined to comment.

• Clients' funds at the bank would be locked up through a tri-party agreement, while stablecoins would be lent by the exchange as collateral for margin trading.

Why it matters: After the collapse of FTX, CEXs face growing pressure as clients seek insulation from potential failures. Allowing institutional clients to store collateral in banks will reduce this risk.

For builders and investors: If adopted, the move will be a step in the right direction. This means that crypto market infrastructures is maturing and institutional capital will be a lot more comfortable entering the space.

• It also means more off-on ramp solutions for builders without relying on a single centralized party.

CASE STUDY

Why Crypto Startups Fail

State of play: Qiao Wang from Alliance has worked with over 100 founders at Alliance DAO, a web3 focused startup accelerator. He wrote an article outlining four key points why crypto startups fail.

• Failure to realize that their product may be the reason for poor user retention — simply put, your products suck, don’t blame it on marketing.

• Excessive funding and over-hiring that leads to a shift in focus from product-market fit to managing a bloated organization — focus on the KPIs that matters.

• Struggle in applying experiences from Web2 or TradFi to crypto without fully grasping crypto’s unique nuances — think from first principles.

• Failure to survive long enough and pivoting at the worst possible time. During a bear market, founders often get clouded by negative sentiment (TAM is too small, regulatory risks, etc.) — be frugal, survive, and double down when there are blood on the streets.

Our take: Crypto founders should study how bootstrapped indiepreneurs operate their companies.

• Even the dominant DeFi protocols such as Curve wasn’t born out of excessive venture funding, but merely started as a project that addresses a real problem in the space.

• Iterate, sell, get to revenue, then scale. Don’t obsessively focus on funding.

Take a peek at our new referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

INSIGHTS

SUI OP $650M Unlocks

SUI and Optimism, two high-profile projects with 9 figures in venture funding will have large token unlocks coming up this week.

• SUI has ~61M tokens ($63M) to be unlocked, which is 13% of the circulating supply.

• OP has ~387M tokens ($590M) to be unlocked, which is 114% of the circulating supply.

• Optimism scheduled an upgrade, whilst SUI is conducting an IDO for SuiSwap DEX to mitigate selling pressures.

FEATURES & GOVERNANCE UPDATE

MakerDAO Proposal to Hike DAI Savings Rate

MakerDAO proposes DAI savings rate (DSR) increase to 3.33%. This would be the second increase, following a previous raise to 1% in December 2022.

The proposal was put forward by Block Analitica, an entity associated with MakerDAO.

• The DSR is the interest rate that users earn when they lock their DAI in MakerDAO's DSR smart contracts.

• The DSR is a monetary lever that balances the supply-demand of DAI by incentivizing or disincentivizing users to lock up their DAI.

• Raising the DSR increases the borrowing costs, as it is funded by stability fees paid by users who borrow DAI using collateralized assets.

Why it matters: If implemented, this move is expected to have broader impacts on interest rates throughout the DeFi market.

• Particularly on lending protocols such as Aave and Compound, where many DeFi users are supplying stablecoins for yield.

Other notable feature updates:

• Ava Labs launches AvaCloud

• Lyra launched an improved version of the protocol on Optimism.

• Worldcoin integrates Safe.

• Coinbase Cloud WaaS goes live.

• EUROC goes live on Avalanche.

• Lukso mainnet goes live.

• Penumbra Testnet goes live

• Tai.money goes live.

• QuickPerps goes live on Polygon zkEVM.

• Stargate disabling Fantom pool.

• 0x Labs releases an upgrade to the Matcha DEX .

• Polygon zkEVM reduces fees.

QUICK BITES

• Genesis, Gemini seek dismissal of SEC lawsuit over lending product.

• Binance explores letting traders keep collateral at banks.

• CFTC warns about clearing derivatives tied to crypto.

• OP, SUI set for large token unlocks worth $650M.

• MoonPay CEO and Execs cashed out before business dropped.

• Russia drops plans for state-run crypto exchange.

• Trust Reserve's team detained by police in China.

• Coinbase CEO cites rising threat from China.

• Ex-Coinbase employee agrees to cooperate in SEC investigations.

• HK, UAE to cooperate on Blockchain and Virtual Assets.

• US Debt Ceiling deal blocks 30% Bitcoin Mining Tax.

MEME & NOTEWORTHY READS

• Amber Group’s read on parallel blockchain potential.

• Joel John’s read on NFT finance.

• Jon Charbonneau’s read on the rollup multiverse.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.