Clubhouse & Twitter, India & Crypto, and more: a link dump
Buy the rumor, sell the news
I’m clearing out some of my Instapaper backlog today, and figured that I’d share a bunch of interesting links.
Clubhouse and Twitter.
Techcrunch reports that Clubhouse and Twitter discussed the latter acquiring the former for $4 billion. That valuation, by the way, is is the same as the proposed valuation for Clubhouse’s next round of funding. Negotiating with VCs for additional funding takes on additional intrigue when you can go into a meeting and say that you have been negotiating an acquisition at that valuation.
An acquisition would solve two problems:
It would give Clubhouse access to a large balance sheet with which to finance development of its platform.
It would save Twitter from having to develop the same functionality internally.
Of course, there is no guarantee that Clubhouse would be able to operate independently were it acquired by Twitter, and, similarly, there is no guarantee that Twitter would devote the required resource to allow Clubhouse to thrive.
Clubhouse may find that the better deal is to remain independent, build out its platform, and figure out how to monetize its audience.
India & Crypto.
Balaji Srinivasan published a massive essay on what India should do with regards to cryptocurrency. It’s hard to summarize the article, due in part, as I have written before, to my unfamiliarity with India, but the salient point is this: India has a unique opportunity to rapidly scale adoption of cryptocurrencies. And, doing so will position it well for where much, if not all, of finance is headed. And that can’t help but redound to India’s benefit.
The question is, of course, whether India will heed Balajis’ advice, or try to ban crypto. The first few paragraphs give you an indication of what Balaji proposes:
How does an Indian small business owner in the middle of nowhere get a loan from anywhere?
Well, today he is increasingly likely to have a phone, a Reliance Jio connection, and access to IndiaStack: a miraculous collection of national APIs for payment, identity, and more that allows him to easily transact with anyone in India. This software platform is the natural insertion point for the Reserve Bank of India’s recently proposed digital rupee, which will further accelerate commerce within India.
But there’s an important piece that’s still missing, which is comparably easy access to the economy outside India. After all, that small business owner can now use his phone to make not just domestic phone calls, but international ones. So shouldn’t he be able to receive funds from around the world as easily as he can now trade with other Indians?
Crypto makes that possible. As we will show, adding crypto functionality to IndiaStack alongside the digital rupee aids India’s interests in two distinct ways.
First, it helps Indians domestically, by giving them direct access to both Indian and international pools of capital.
Second, it helps India internationally, by developing an open source software stack that any country can use for both domestic and foreign transactions, without dependence on either American or Chinese corporations.
US Dollar Hegemony & China.
Economist Kenneth Rogoff wrote recently about the fragility of US dollar hegemony. I recently published a piece about Peter Thiel’s comments on China and bitcoin. His thesis seems to be that China has an interest in bitcoin’s success because, to the extent that bitcoin succeeds, it weakens the US dollar’s position in the world. Anything which threatens US dollar hegemony is seen as a benefit to China. In consideration of this, it is useful to read Rogoff’s thoughts:
For many reasons, the Chinese authorities will probably someday stop pegging the renminbi to a basket of currencies, and shift to a modern inflation-targeting regime under which they allow the exchange rate to fluctuate much more freely, especially against the dollar. When that happens, expect most of Asia to follow China. In due time, the dollar, currently the anchor currency for roughly two-thirds of world GDP, could lose nearly half its weight.
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The long-standing argument for a more flexible Chinese currency is that China is simply too big to let its economy dance to the US Federal Reserve’s tune, even if Chinese capital controls provide some measure of insulation. China’s GDP (measured at international prices) surpassed that of the US back in 2014 and is still growing far faster than the US and Europe, making the case for greater exchange-rate flexibility increasingly compelling.
A Bull Market for Collectibles.
John St Capital, a London-based investment firm, recently wrote about platforms for the buying and selling of collectibles, such as Rally. I noted recently that platforms like Rally don’t seem to have solved secondary liquidity, which is fatal for these kinds of companies. John St. notes that this market is developing quickly, however, and that investment funds devoted to this asset class may function as a kind of buyer of last resort.
In 2020 we saw the continued growth of what we call “Alternative Alternative Asset” marketplaces such as platforms like Rally with 120 IPO’s this year across collectible cards, memorabilia, watches + luxury goods, comics + literature, and wine + whiskey. On Christmas Day they were able to sell out a $300,000 complete collection of the 1990’s Bulls championship rings in less than 2.5 minutes to 695 investors; something that would have taken weeks just 18 months ago. Rally has operated like a true marketplace with a handful of time sensitive M&A (e.g. Jordan cards during The Last Dance), shareholders voting down a deal only to see the price rally (e.g., Pokemon Cards), and fairly predictable investor behavior/trading patterns around the various trading windows, showing the maturation of the platform and in turn the “asset class.”
We’re starting to see data providers come into the space such as Atlan Insights which has an Asset Table across marketplaces that totals $104M in market cap. While still small, we wouldn’t be surprised to see that number 5-10x next year as investors start to see uncorrelated return profiles, and secondary trading becomes more mainstream, while asset sales provide for the ultimate liquidity event.