Can VCs game crypto out of this downturn?

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Musk held onto doge last week. We are talking about where all of this money is going.

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maybe, it’s all a game?

A dispatch from the desk of an editor.

The reality is that the dreams of web3 investors and founders are facing a bit of a jam, due to a downturn in the value of the coin. This isn't ideal for VCs who saw a consumer web dream within grasp, but luckily they've got some deep pockets thanks to recently raised mega funds

It is a rough time for the core audience of consumercryptocurrencies, with many of them discouraged from spending more time and money on new projects. There is a question of how to put this VC money to work in a bear cycle. Others might back consumer projects that are further away from the wider world ofCryptocurrencies but expose users to synthetic economies, wallet and digital goods, an arena that is well suited for games.

I would expect a lot of these dedicated funds to dump a lot of their funds into studios and platforms that are pursuing this. Given that NFTs are still treated with a high degree of hostility by app stores and gaming platforms, there are a lot of significant challenges.

It is possible to find new eyeballs in the self-contained world of gaming titles with dedicated token. As customer acquisition costs climb, VCs may be more willing to subsidize customers directly as part of user acquisition, returning to the days of the gig economy.

It has been a strange bull cycle. It's fair to say that there wasn't anything that emerged that was really good. Growth to the most extreme ends of the game was juiced by profit and clearcut ponzinomics. Fun games take a level of user concern that is hard to maximize near-term profit on both ends of the deal.

the latest pod

The U.S. regulators made it seem like winter was already here. Three people were arrested by the U.S. Department of Justice for allegedly trading on inside information. The Securities and Exchange commission charged them with securities fraud because they argued that some of the coins they had traded were securities. In my "this week in web3" section below, we shared our unofficial thoughts on how the laws might be interpreted.

We talked about the situation with bitcoin and the possibility that it could turn Musk into a skeptics, as well as the cancellation of NFTs by the popular video gameMinecraft. David Nage, a portfolio manager at Arca, was our guest and he helped us understand the markets.

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follow the money

The place where startup money is moving.

1. Decentralized social media (DeSo) platform DSCVR, built on Dfinity’s Internet Computer ecosystem, snagged $9 million in seed funding led by Polychain Capital.
2. Unstoppable Domains, a popular blockchain naming system provider and identity platform, raised $65 million in its Series A funding round at a $1 billion valuation led by Pantera Capital.
3. Aptos Labs, a blockchain project from ex-Meta employees, raised $150 million in an FTX-led Series A round. 
4. Blockchain ecosystem Topl has raised $15 million in a Series A funding round led by Mercury, Republic Asia and Cryptology Asset Group to help companies track and monetize social impact initiatives.
5. Crypto lender CLST nabbed $5.3 million for its seed round from investors including Coinbase and Kraken.
6. Solana-based NFT ownership platform Cardinal announced its $4.4 million seed raise led by Protagonist and Solana Ventures. 
7. Web3 gaming firm Mighty Bear got $10 million in a Framework Ventures-led funding round for its Mighty Action Heroes game.
8. FTX CEO Sam Bankman-Fried led a seed round for Trustless Media, a startup that is building community-owned web3 shows.
9. Cybersecurity blockchain protocol Naoris raised $11.5 million in an equity and token-based financing round from investors including Draper Associates.
10. South Korean metaverse company Anipen secured investment of ~$12 million in its ongoing series B funding round from Medici Investment and others.

The race to build a social media platform on the blockchain

the week in web3

There is a weekly window into the thoughts of a reporter.

The former employee and his two associates were charged with securities fraud by the SEC after they were arrested by the U.S. Department of Justice. The SEC is looking into the possibility of allowing securities to trade on the platform without proper disclosures.

The SEC charged in the securities fraud case with using several niche coins. They chose to go after the same token as the ones they didn't. According to the company, it vetting all the token on its platform before listing them to make sure they aren't securities

It will have a domino effect on the industry if the suit is successful. There are lawsuits being filed against the companies by disgruntled investors in order to get them in trouble for illegally selling securities in the U.S.

It is worth looking at what the current securities laws are and how they might apply to Coinbase until we know more about how regulators and legal experts will treat each individual token. We took a deep dive into the four-part "Howey Test" to see if the SEC has a stronger argument.

If it walks like a dog and barks like a dog, perhaps it’s actually a digital asset security

TC+ analysis

Some of this week's analysis can be found on our subscription service.

The valuations of cryptocurrencies may sink until September.

“Tons of capital has been raised across the crypto industry in recent months, but there has been a noticeable pause in deployment. That might change in the coming months. As it’s taken longer to close crypto VC deals, valuations across the industry have dropped, according to David Nage, venture capital portfolio manager at Arca.”