We have written previously about the sheer speed of growth achieved by certain companies and asset classes. At this moment I believe we need to revisit this analysis and conclude that things are moving even faster. In particular, the entire world of finance seems to be rapidly approaching an existential moment. And the most obvious way to illustrate that shift is with the most basic instrument in the financial world: money. We should pay particular attention to the following five developments as indicators of much more significant structural moves:
- Research by Blockdata, a blockchain market intelligence firm, indicates that 55 of the top 100 banks by assets-under-management have increased their involvement in blockchain and cryptocurrency projects. The structural signal is clear – digital currencies are coming.
- FTX, the cryptocurrency exchange, recently raised $900 million at a valuation of $18 billion. Its founder, Sam Bankman-Fried, is already reputed to be the richest person in crypto with a net worth of $16 billion. The structural trend to watch here is how digital currencies will reduce intermediaries costs, tolls, friction etc. However, there will still be some tolls paid. Whoever cracks that opportunity is quite likely to be the planet’s first dollar trillionaire. Keep an eye on Sam.
- This week Budweiser changed its Twitter profile to a Non-Fungible Token (NFT) which it purchased for 8 ETH(or Ether) on the Ethereum blockchain platform. Do not laugh. Other US corporate heavyweights like Coca-Cola, Marvel and Visa have been dabbling in NFT trading too. The structural point here is less clear but NFTs like other digital assets will probably become more mainstream ‘stores of value’ ie currency to be used in commercial activities.
- Perhaps as an illustration of the growing influence of NFTs it was interesting to note in recent days that a new digital token surpassed meme favourite, Dogecoin, in market value. Solana is a cutting edge blockchain technology firm which is particularly suited to supporting NFT issuance. Recall the race to remove friction and costs in the digital world and then know Solana is much faster and more scaleable than other blockchain platforms. Solana’s token, the sol, has rocketed from circa $30 in July to $140 this week. There is a growing realisation that the structural ‘must-haves’ for digital assets will be scale and speed.
- Finally, new digital currencies and platforms are going to need one more thing – customers. The greatest opportunity is actually those customers who have very little money. We are talking about the 2 billion adults in the world who remain ‘unbanked’. Digital currencies can remove the banks from the equation and help the flow of money to the poor. In fact, El Salvador with 70% of its population without a bank account has just adopted Bitcoin as a national digital currency. This is the last great frontier of banking and it’s a structural challenge in desperate need of impact investors who can see a role for digital currencies.
It is probably appropriate to finish up on the impact investing angle because events closer to home this week highlighted some of the points above. A few days ago Pollen Street Capital invested an estimated €300 million in Irish mobile top-up payments technology player, Ding. Apart from being a fantastic result for founder Mark Roden and team after a fifteen year journey, the reports on the deal threw up two interesting nuggets. Firstly, Pollen Street Capital were keen to highlight the “impact investing” motive for the deal and second, Ding is connected to 4 billion phones through 400 mobile operators on the Ding platform. Four billion phones…. Wow!
Can you imagine the impact of digital currencies and tokens going directly to consumers and possibly without even needing a bank? Lots to think about and plenty of weird and wonderful surprises ahead. I have read recently one needs to put your ‘sci-fi mind’ to work when reflecting on crypto developments so I will conclude with some words from The Hitchhiker’s Guide to the Galaxy author, Douglas Adams:
“I’ve come up with a set of rules that describe our reactions to technologies:
- Anything that is in the world when you’re born is normal and ordinary and is just a natural part of the way the world works.
- Anything that’s invented between when you’re fifteen and thirty-five is new and exciting and revolutionary and you can probably get a career in it.
- Anything invented after you’re thirty-five is against the natural order of things.”