Welcome back to Chain Reaction.
Last week, we talked about layoffs and the Winklevoss rock gods. This week, we’re looking at a new layer of crypto doom and gloom.
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We’ve talked crypto crashes a couple times already in the short life of this newsletter but the sell off this week has spooked crypto insiders in a very different way. Things are happening so quickly right now that even seasoned crypto investors seem to be feeling uneasy about this one.
While crypto winters have come before, they’ve never aligned with warning signs of a broader prolonged recession. Things have already plunged so quickly at the signal of a recession that insiders fear a lengthy bear market could hit crypto far more brutally than expected — tearing tokens to lows far below the highs of the 2017 bull run.
This means rough things for tokens, but also more brutal realities for the entire ecosystem.
This week, we saw the interconnectedness of major institutions as crypto lending protocol Celsius stuttered and brought down Ethereum prices with it as investors feared a price collapse brought on by reportedly over-leveraged players like 3 Arrows Capital. Despite the decentralization ethos of crypto, the potential for cascading failures seems every bit as possible for the crypto world as it does for traditional finance markets.
If things do fail harder and faster than before, the question is how quickly young startups and crypto communities can adjust to shifting fortunes. Few companies have to deal with the stressed of both crypto and public markets like Coinbase which laid off more than 1,100 people this week, but plenty of startups raised mega-rounds in 2021 to theoretically future-proof their companies. For DAOs and protocols with treasuries sitting in ETH, many have seen their budgets for community efforts and stretch projects decimated, threatening their survival.
Without the promise of riches or with reduced interest in blockchain-based exclusivity, where will consumer demand go? Will governance communities grow more self-motivated and more concerned about short-term goals when their groups have gone from being filled with millionaires to seeing their profits disappear into thin air? How much worse will things get?
the latest pod
Somebody call 911. Crypto lending protocol Celsius isn’t fire burning, but it did freeze all customer withdrawals this past weekend, citing concerns about its own liquidity amid “extreme market conditions.” Since then, the firm, which claimed to have 1.7 million users before the pause, has seen its own token plummet (and then recover, and plummet again), and sent the already-struggling crypto markets into a tailspin. We talked through what went wrong on the Celsius network and how it’s surprisingly intertwined with the rest of crypto.
Regulators are seizing this moment in the downturn, while web3 is already looking pretty shady and investors are pissed about losing money, to crack down on certain firms in the space. From BlockFi to Binance.US, some of the biggest names in crypto are facing lawsuits and/or fines for their practices.
The tech billionaire bros are still alright, though, for better or for worse. Block’s Jack Dorsey announced this week that he’s ready to cancel web3 and move on to his vision of the internet, which he’s calling “web5.” Elon Musk weighed in with a particularly creative proposal too, which we discussed in this week’s episode.
Our guest, Aaron Levie, built a successful SaaS business in Box, and now he’s on a mission to beef – respectfully – with web3 stans all over Twitter. Levie explained to us how he manages to walk the fine line of being a crypto critic without landing in the bulls’ bad books.
follow the money
Where startup money is moving in the crypto world:
- Indonesian fintech platform Flip raised a $55 million Series B extension led by Tencent with participation from Block (formerly known as Square) and existing backer Insight Partners.
- NFT infrastructure startup NFTPort raised a $26 million Series A round led by Atomico.
- ScienceMagic.Studios, a digital asset-focused brand studio, bagged $10.3 million in pre-seed investment from investors including Liberty City Ventures, Digital Currency Group and Coinbase Ventures.
- A co-founder of Words With Friends raised $46 million in a Series A round led by Paradigm for their web3 gaming startup, The WildCard Alliance.
- Molecule, a platform where DAOs can back medical research projects, secured $13 million in seed funding led by Northpond Ventures.
- Metaverse play-and-earn company Atmos Labs brought in $11 million in a seed round led by Sfermion.
- Creator-focused web3 sitebuilder Tellie nabbed $10 million in Series A funding from investors including Malibu Point Capital, Galaxy Digital and Dapper Labs.
- Crypto payment platform Nume raised $2 million in a pre-seed round led by Sequoia India.
- Dutch fintech Bits of Stock, which offers crypto rewards, raised €4.2 million in its seed round from Keen Venture Partners, Yellow Accelerator and others.
- Decentralized trading infrastructure startup Orderly Network raised $20 million in Series A funding from investors including Three Arrows Capital, Pantera Capital and Dragonfly Capital.
the week in web3
Crypto markets were down pretty bad last week (though admittedly, it’s only been downhill since then). But temperatures were up in Austin, Texas, as 20,000 people in the crypto community came together to discuss how to navigate their industry looking like it might go up in flames. Anita had the chance to attend the conference, so she’s back with some thoughts from the field:
I have a lot of friends and acquaintances who aren’t nearly as deep in crypto as I am, and one question I’ve heard over and over again these past few weeks is whether this downturn in the digital asset markets is the death knell for web3. In other worlds, now that the music has stopped, is the party actually over?
I shared my two cents/two Satoshis on the matter on Los Angeles public radio this week (check it out), but I want to use this space to highlight some thoughts I have after hearing from folks in the industry at Consensus. In short, I don’t think this is the end of crypto by any means, but it’s certainly going to be a tough time for the space.
On a panel about how to invest in web3 in a turbulent market, Arca’s Chief Investment Officer Jeff Dorman made an interesting point about what makes web3 so different from most other sectors, at least as they’re defined by the financial markets.
“I don’t even think digital assets [are] an asset class. I think it’s a technology that is now wrapping all asset classes,” Dorman said. In tradfi, investors can specialize based on products (e.g. debt, equity, derivatives) or sectors (e.g., industrials, retail, real estate). But in web3, those categories haven’t been clearly defined, because blockchain technology has been used in so many different ways, from file storage, to selling digital art, to tracking peer-to-peer money transfers.
That’s part of why I think we can’t group “crypto” or “web3” or “blockchain technology” in the same bucket – even those three terms all have slightly different meanings. Perhaps that’s also why the vibe at Consensus felt puzzlingly positive despite the market turmoil. Each project is so different, and each builder has conviction in why their own use case for the blockchain makes sense and isn’t like all those other projects that are losing value or seem like scams. At a time of so much uncertainty, the most important thing reporters and analysts can do is look at this industry with nuance, and evaluate each project case-by-case. It’s going to be a wild ride, but I believe at least some parts of web3 are here to stay, and I see it as my job not only to shed light on what applications of this technology are working and not working but also to try and make sense of why.
Here’s some of this week’s crypto analysis you can read on our subscription service TC+ (written by TC’s Jacquelyn Melinek):
As Celsius accelerates the crypto sell-off, who pays the price?
This week, the global crypto market capitalization fell below $1 trillion for the first time since January 2021 after one of the largest centralized crypto lenders, Celsius, landed in hot water after it paused all withdrawals, swaps and transfers for users. The driver behind its freeze isn’t completely clear, yet, but it resulted in another bank-run scenario similar to what we saw last month with the UST and LUNA situation – and it’s causing another drop in the crypto market.
Hedge funds plan to buy more crypto amid a down market and potential regulatory clarity
What seemed like a rare sector is now gaining popularity as the number of specialized crypto hedge funds has grown to over 300 globally, according to PwC’s Global Crypto Hedge Fund report. These funds are on “the search for alpha” to beat the benchmarks and are willing to try something new and different, John Garvey, global financial services leader principal at PwC, said to TechCrunch. Even though markets are highly volatile, two-thirds of all hedge funds surveyed that are currently investing in the space plan to deploy more capital into the market by the end of 2022, it said.
As DAOs continue to blossom, here’s how to keep yours from wilting
This past year has been one big growth spurt for DAOs (decentralized autonomous organizations) but not everyone in the space is convinced that they’re being formed properly or in a way that ensures success. But what happens when the hype fades? People stop voting, treasuries can wither and abandoned, dead communities turn into “DAO graveyards.” To prevent that from happening, some say there needs to be a restructuring of the way DAOs are formed.
Thanks for reading and you can get this newsletter in your inbox every Thursday by subscribing on TechCrunch’s newsletter page.
Lucas and Anita
The Orgy Of Nontaxation
Sometime during the next two years — we don’t yet know when — the House of Representatives will be hosting a public orgy. House Speaker Kevin McCarthy, R-Calif., has promised to hold a floor vote on the FairTax Act of 2023 (H.R. 25).
The promise was one of multiple concessions McCarthy made to the Freedom Caucus to become speaker. As we shall see, the FairTax is nothing if not an exuberant orgy of nontaxation.
Now, you may find yourself tempted by this fiscal seduction. There’s a visceral titillation at the thought of not paying income tax and never again dealing with the bureaucracy of the IRS. But caution is well advised. On close inspection, the FairTax is one apple that you don’t want to bite into.
In case you missed it, the main feature of the FairTax is that it would eliminate all federal income taxes, for both individuals and corporations. They’d be replaced with a 23 percent national sales tax, which would apply broadly to goods and services. The FairTax would also dissolve the IRS.
The proposal would eliminate all federal payroll taxes, as well — which are technically separate from income taxes, although they’re imposed on your wage earnings. That includes the payroll taxes that fund Social Security and Medicare. The proposal would also eliminate withholding taxes, estimated taxes, self-employment taxes, the estate and gift tax, and the alternative minimum tax. That’s a mother lode of repealing things.
The congressional debate over the FairTax will center on whether we want our federal government to be funded primarily by revenue mechanisms based on a person’s ability to pay. The salient point about an income tax is that it allows for a progressive rate structure, in which those of us with higher annual incomes pay more than folks with lower annual incomes. And by “more” I mean both in gross terms and proportionally. That’s what it means for a tax framework to be based on the ability to pay.
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By contrast, a consumption tax is conceptually divorced from a person’s ability to pay. These taxes are inherently blind to the consumer’s economic status or income level. The amount of sales tax a billionaire pays when buying a six-pack of Coca-Cola is identical to the sales tax a homeless person pays on the same purchase. You might regard that outcome as fair, or you might regard it as a perversion of economic justice. Either way, that’s how all sales taxes operate.
Here are two other things to note about the FairTax.
First, it claims to be revenue neutral. That is, it intends to neither expand nor reduce the overall volume of tax receipts collected by the federal government each year. This point is highly disputable. Mathematically, there’s some rate at which a national sales tax would produce receipts equivalent to what we collect under current law. Nobody knows exactly what that rate is, and it might be a lot higher than the proposed figure of 23 percent.
On the matter of revenue, I suspect that proponents of the FairTax might derive pleasure if the resulting yield were less than that of all the taxes it would replace.
People in this camp have a track record of regarding diminished taxation as an effective constraint on government spending. You often hear advocates of small government comment on the need to “starve the beast.” Realistically, the FairTax is a platform for doing just that.
Second, the FairTax promises price stability. That is, the introduction of a national sales tax would not increase retail prices. The claim seems dubious, but here’s what they are getting at. Tucked away within every current retail price is an economic component that corresponds to the embedded costs of each party in the supply chain, from providers of raw materials to manufacturers to wholesalers and retailers. Some of those embedded costs are attributable to the current system of income and payroll taxes — both the taxes themselves and the accompanying compliance costs.
The theory goes that once Congress repeals all income and payroll taxes, the related embedded costs would simply disappear. They would vanish into the ether, by force of the invisible hand of the marketplace. Conveniently, their elimination almost perfectly offsets the effect of the new sales tax. Et voila, price stability.
For some sectors of the economy, removal of embedded costs is projected to more than compensate for the introduction of the new tax — such that prices of those goods and services will actually decline. Imagine that — a 23 percent retail sales tax that makes prices go down. It’s almost too good to be true. Hint, hint . . . It is.
As a self-professed tax policy nerd, I’ll admit that I retain a measure of fondness for the idea of a consumption tax. The concept has some intellectual merit. Compared with the income tax, consumption taxes are pro-growth because they functionally exempt savings, which fosters capital formation.
Despite the known growth effects, no country in the world funds itself exclusively through a national consumption tax. There’s a good reason for that. Growth potential, while important, isn’t the only objective.
Most nations couple their progressive income tax with a broad-based consumption tax (namely, a VAT). This is a classic pattern. It acknowledges that consumption taxes are regressive, but justifies their presence because the resulting tax receipts can enable a wide variety of federal spending — which would be difficult to support solely through other revenue resources.
The key point is that these consumption taxes supplement the income; they do not replace it.
The dominant trend in international taxation over the last 25 years has been for countries to reduce their corporate tax rates as they increase VAT rates. This is usually done for the sake of global competitiveness. In effect, these governments are incrementally trading away the taxation of capital income for the taxation of consumption.
The United States can’t participate in this global trend because we don’t have a VAT, or some other national consumption tax, to make up for the lost revenue. In effect, the FairTax is saying we can bypass the trade-off by dispensing with income taxation altogether. That’s a high-risk proposition. It swaps a progressive revenue source for a regressive one.
Despite my fondness for the consumption tax, I can’t jump on the FairTax bandwagon. If it’s enacted, the fiscal implications would be severe, as would be the cultural implications. Stripped naked of all distractions — spurious claims of deprived liberty — the FairTax is revealed to be more about those lusty cultural changes than it is about the dry and academic business of tax reform.
Bitcoin ATM – Learn More About Quick Change Cash to Cryptocurrency
Cryptocurrencies such as Bitcoins have become a global currency. They are well-known globally and more popular than traditional money, for example American Dollar.
This article will tell more about Bitcoin ATMS with zero commissions, how to change crypto to cash in a short time or how to find the most beneficial Bitcoin ATMs.
- Bitcoin ATM with 0% commission
- Bitcoin ATM can change cash on several cryptocurrencies
- How to change cash on cryptocurrency?
- Where to learn about bitcoin ATMs?
- Is it safe to use Bitcoin ATMs?
- What are the Bitcoin ATMs locations?
- What are the opening hours of Bitcoin ATMs?
- Where can you find some information on exchange rates?
- Where can you find some more information on Bitcoin ATMs?
Bitcoin ATM with 0% commission
When you want to buy and sell bitcoin you do not have to pay an additional fee in your area like many different bitcoin ATMs charge (even 8%). Every bitcoin ATM provides transactions with 0% commission. What is more, the clients can get various discounts and enjoy higher exchange rates.
Bitcoin ATM can change cash on several cryptocurrencies
Although Bitcoin is the most recognizable cryptocurrency in the world, there are also other cryptocurrencies worth mentioning. What is more, they are also available in the bitcoin ATM. They are the following: Tether (USDT), Litecoin (LTC), Tron (TRX) and Ether (ETH). The whole process – it means converting cash to your favourite cryptocurrency lasts a few minutes.
It is very intuitive and every user can change cash to crypto without any problems.
How to change cash on cryptocurrency?
It is very simple to use the Bitcoin ATM. It is similar to withdrawing money from a standard ATM. The first thing you have to do is to insert cash and then scan qr code. Next, you have to select the transaction details (exchange rate and transaction fee) and finally the cryptocurrency is transferred to your wallet.
It is childishly easy to use the bitcoin ATM. As an outcome, it is also popular in Ukraine where the war with Russia takes place.
Where to learn about bitcoin ATMs?
If you want to get some relevant knowledge on bitcoin ATM and how to buy and sell bitcoin and litecoin you should visit the official social media of bitcoin ATM. There is a tutorial for beginners who have never tried the bitcoin ATM and want to know what bitcoin ATMs are.
The popular social media where you can find the information are You tube and Facebook. Furthermore, it is worth watching it regularly to learn more about special offers or unique discounts for anonymous bitcoin buyers and sellers.
Is it safe to use Bitcoin ATMs?
The clients should feel safe during converting cash to cryptocurrency. That is why, the bitcoin ATMs are located in public places, mainly in the shopping malls where the advance monitoring system is provided. What is more, it is also possible to change cash to cryptocurrencies in independent places. However, in those places the doors are locked and the person who is doing the transaction can feel safe.
What are the Bitcoin ATMs locations?
If you need to change cash to cryptocurrency, you have to see the bitcoin ATM map. There you can find all bitcoin ATMs in your area. What is more, you can get some interesting details about the bitcoin ATM. There is provided the name of the city with a detailed address as well as additional information on the bitcoin ATM. Moreover, you can find there also a picture of the bitcoin ATM and available funds to withdraw at the moment.
What are the opening hours of Bitcoin ATMs?
If you are in Madrid, the capital city of Spain you can check the opening hours of Bitcoin ATMs Madrid online. At the same website where you can check the location of a bitcoin ATM, there is some information about opening hours. The majority of bitcoin ATMs are open 24 hours, 7 days a week and they are available in the shopping malls or independent places. However, some of them are available in limited time.
That is why, it is always worth checking the opening hours before you visit the bitcoin ATM.
Where can you find some information on exchange rates?
The exchange rate is the crucial information when it comes to converting cash to cryptocurrencies. However, it is not a problem when you use the bitcoin ATMs. At the website where the detailed address and opening hours are provided you can also find some information about the current exchange rate.
It is worth selecting the place that offers the best exchange rate before you leave your house.
Where can you find some more information on Bitcoin ATMs?
Before you make a transaction at a bitcoin ATM, you should learn more about the bitcoin ATMs. You can do it at the official website of the device or at one of the YouTube channels where the latest information and detailed tutorial are provided.
You should also visit Facebook and Instagram where the latest news is updated and find out that there are more and more bitcoin ATMs in your location.
The Future Of Economic And Workforce Development
Our economic attention currently is fixed on national policy, with growing risks from a debt limit deadlock and debates over inflation versus recession. But economic prosperity also depends on state, regional, and local policy, and now there’s a free guide to some of the best thinking in the field in the newest edition of the Economic Development Quarterly (EDQ).
EDQ is a leading journal overseen by the W.E. Upjohn Institute for Employment Research. It brings together practitioners and scholars through “supporting evidence-based economic development and workforce development policy, programs, and practice in the United States.” (I’m a member of the editorial board, and also a contributor to this new issue.).
The new issue asked experts associated with the journal “what are the key research and policy questions facing economic development and workforce development today?” In order to reach a broad audience, including policy makers, academics, journalists, and the public, the issue is free for a limited time.
There are 15 articles in the issue, and their range and excellence make it impossible to summarize them. Some focus on companies and firms, including how entrepreneurs can be included in economic development, what policies and programs are most effective in supporting businesses and job creation. Other analyze how public economic development and workforce professionals in the field can be most effective in our complex and tangled systems.
Several articles examine changing workforce dynamics. How can policy engage with macro trends like globalization, high housing costs, and changes in commuting and working from home? Can greater inclusion for the workforce be part of an effective economic development strategy? What would economic development look like if it paid more attention to environmental, racial equity, and family and household issues?
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My contribution draws on my new book, Unequal Cities: Overcoming Anti-Urban Bias to Reduce Inequality in the United States. The book outlines how America depends on cities for innovation, growth, and productivity, but also how our political systems—regional, state, and national—are biased against cities.
That pervasive bias holds down both regional and national productivity and growth. And it perpetuates racially stratified inequality in jobs, economic growth, housing, and education.
Wealthy (and predominantly white) suburbs capture the lion’s share of urban economic growth while not paying their fair share of the costs. That ongoing and structural racial bias is perpetuated over time by our public policies and fragmented metropolitan governments. This in turn makes it very hard for cities to address these problems on their own.
I argue that hyper-mathematized models in urban economics divert energy from more empirical engagement on our economic and workforce problems. We need multi-disciplinary analysis of policy, with special attention to how seemingly neutral policies generate racial and other forms of inequality. And we must recognize how our metropolitan fragmentation and segregation hold back shared economic prosperity.
Although there’s a wide range of policy viewpoints in the EDQ issue, all of the authors use research and analysis to help improve the places where we live. That distinguishes this work from much of mainstream urban economics, which is skeptical of place-based policies. Standard urban economics favors individually-based approaches emphasizing education and skills, and encouraging mobility by companies and people.
Of course, education and skill development are essential components of sound policy, and several of the EDQ articles suggest how to improve it. But in the real economy, experts like those at the Economic Policy Institute show our policy bias towards individualized and company-focused approaches hasn’t led to shared prosperity.
Instead, as watchdog analysts like Good Jobs First point out, we far too often see wasted tax subsidies going to firms that don’t need them, without good jobs and other benefits that were promised in return for the tax breaks. Public education mirrors the unequal fragmentation of regional governments, with suburbs creating better education from their higher property tax bases and wealth while core cities struggle to generate adequate educational funding.
So if you’re interested in economic and workforce development, national and regional and city prosperity, and how equity and growth can be combined in public policy, get your free issue of Economic Development Quarterly. I’m proud to be in such distinguished company, and there’s a lot to learn from them.
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