Jordan Cooper's Blog: startups, venture capital, etc…

What Wall St Wants

Posted on December 14, 2017. Filed under: Uncategorized |

Earlier today someone who I frequently invest alongside and think with in the blockchain world told me about a company he talked to that makes it easier for wall street to participate in the crypto markets. If you’ve been paying attention, “the herd is coming,” and there is no shortage of friction or nascent solutions between here and it’s arrival. Hedge funds, pension funds, endowments, etc. all have an interest in owning cryptocurrency, but the infrastructure that enables them to do so in a familiar, comfortable and compliant way doesn’t totally exist yet. Their frustration and demands are becoming a louder voice in the crypto world.

So there’s this narrative around Bitcoin, and the next pick your number of “alternative currencies,” which goes something like “unlike other bubbles where institutions got in first, in crypto retail investors got in first, and it’s not the taxi driver who’s coming in next to really drive up the price, but rather the fancy institutional money…and when they come in…and when all these surrounding services and products enable ‘an institutional way of doing things’ the floodgates will open, incredible buy side volume will follow, and all the early nerds and retail investors who listened to their family’s nerd at Thanksgiving, will be rewarded handsomely.”

I don’t take issue with this narrative…from the hedge funds and endowments I’ve talked to, it’s true…whether or not this dynamic is already priced into the market or not is debatable, but there’s no question that greasing the skids for large pools of professionally managed money to enter the crypto market will be good for early holders. What I do take issue with is the distraction…the capital markets are a necessary and valuable actor in a number of the novel systems being built on the blockchain…they enable shortcuts to liquid networks, a point of exchange for value accrued in a system applied to debts owed outside of the system, and you don’t get a lot of the most interesting coin governed systems without hooking the networks’ unit of value up to the secondary market where these institutions can buy their piece of the future your building…but I see very talented people increasingly viewing wall street as their user or customer, and letting wall st’s voice influence what within the blockchain ecosystem they choose to build or spend time on.

The premise that you could design a network that organizes people or businesses into a behavior that wasn’t possible without the blockchain, and that you could get rich doing it by owning the coin which governs it, seems to be slipping in expected value relative to designing the service that let’s the billions of dollars at Blackrock or Point72 buy top 20 market cap coins efficiently and without regulatory or LP headaches. Don’t get me wrong, I love bitcoin and think there are a lot of important reasons why these pools of capital will strengthen the likelihood that it achieves it’s ultimate destiny, whatever version of it’s destiny you choose to believe, but I think the much more interesting picks and shovels work, in the future that I want to see, will be done by projects that contemplate developers and individuals, as opposed to financial institutions, as their user…i feel like the ethos that attracted me to the blockchain was this energy around bottom up self organization…and a redistribution of power from those that held it to all beneath them…and now we are falling all over ourselves for Goldman Sachs or Tiger Global to come hang out with us.

It’s hard not to get sucked into the solutions that bring wall st to crypto…the near term economic opportunity, especially in a bull market such as this, are undeniable…but from a venture perspective, investing in these slivers of institutional grease feels largely like investing in optimizations as opposed to revolutions in a moment where revolutions are surely being built…or at least gestating in the minds of those that could give two shits about what Lloyd Blankfein thinks of their work.

I am guilty of the same greed as everyone else…i want the institutional volume, i want the money…but if that narrative comes true…and it seems it might…it will be to the benefit of work I did years ago…and not work that I am doing right now and going forward. There is more out there to be discovered…brand new economies to be formed…new jobs to be created…new social structures, work structures, software structures…and yes economic structures…that will be attractive to wall street by virtue of their merit, and not FOMO or easy arb opportunities as they exploit the seems of a nascent market that hasn’t been abused, and therefor hardened, as badly as public equities or the like.

Refreshing coinmarketcap every 10 minutes is not making progress. Watching the talking head on CNBC call BTC $100K per coin is not making progress…and building the products and services that enable the herd to get here quicker doesn’t feel much like progress either…not in the context of what’s actually being built behind the 3 letter tickers and 30% daily swings that everyone is so fucking obsessed with right now. The frenzy and the fast money is distracting us from what is possible…

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