Blackbox Weekly
Your dose of fintech news, views and insights
Fintech Around The Web
Robinhood’s valuation now tops $5 billion. Can its quality of users back that valuation up?
With a new investment of $350 million, Robinhood’s valuation shot up considerably last week — to over $5.6 billion. Business Insider’s Frank Chaparro called that valuation into question, citing documentation that the app’s most popular stock — Apple — is only held by 141,000 of the platform’s users. At 3.5% of the overall user base, that’s a far cry from the 4 million users the commission-free stock trading app touts on its website, bringing the quality of its user base, and therefore the high valuation for the company, into question.
The Beanie Babies of Blockchain Tech Just Raised $12 Million from Andreessen Horowitz
CryptoKitties, one of the world’s first games built on blockchain technology just raised a combined $12 million between Union Square Ventures and Andreessen Horowitz, according to Business Insider. Launched last November, CryptoKitties represents the first time a project has created both scarcity and non fungibility in a digital sense that’s reached any level of popularity. While bitcoin created digital scarcity, CryptoKitties represents the introduction of digital non fungibility, meaning each Kitty bred in the application is unique and can’t be replicated — making the Ethereum-based game’s digital kitties collectible, just like Beanie Babies. For now, CryptoKitties only enables the buying, selling and breeding of the digital cats. But with the funding, CEO Roham Gharegozlou said he intends to build out a gaming universe around the feline avatars, in addition to exploring other crypto-collectable projects. “This is the early glimmers of what a blockchain-based game economy could look like,” Gharegozlou told Business Insider.
Growth of Fintech Office Space in Manhattan Signals Heating Up Tech Competition
The amount of office space taken up by either financial technology upstarts or similar in-house counterparts within financial institutions in Manhattan has nearly tripled since 2014, reportedly up to 877,000 square feet last year. The industry isn’t just growing, but the space comes from a need to house the tech talent the companies need in order to get their products up and running, maintained and competitive. From tech companies to banks, the increase in office space reflects a ramp up on both ends to be the first to disrupt finance with technology. Or, perhaps, not be the last one left in the dust. “With fintech, it’s the tech part of that that is affecting everybody and everything,” David Levinson, chief executive of L&L Holding Co., told the Wall Street Journal. “Everybody is trying to figure out how to get ahead of this so they don’t get blindsided by something that a competitor is doing.”
Blockchain Tech? No One Wants to Be Left Behind
Huawei, the third largest maker of smartphones in the world, is reportedly in conversation with Sirin Labs to create a handset capable of running applications built using blockchain technology. To enable these decentralized applications, or DApps, the handset would run Sirin Labs’ operating system, SIRIN OS, alongside Alphabet Inc.’s Android system. According to Bloomberg, Alphabet’s Google has also reportedly been testing blockchain services with developers on its cloud since 2016. The desire of major technology companies not wishing to be left behind may just help bring the technology beyond a moment saturated in speculation, and to the realization of blockchain technology-based products actually accessible to the masses. For its part, IBM has been investing in and promoting the application of blockchain technology for some time. “You’re going to see an unbelievable amount of R&D expenditures go into this,” said Jeff Richards, a managing partner at venture firm GGV Capital, told Bloomberg in response to Google’s experimentation with blockchain. “Everybody learned from the internet and mobile that you can’t afford to wait.”
Circle Invest joins latest rank of cryptocurrency investment apps taking on Coinbase
Coinbase, U.S.’ most popular cryptocurrency exchange, booked $1 billion in revenue last year. It’s now been several months since bitcoin peaked near $20K in December, meaning rival companies eyeing that revenue and the potential of cryptocurrencies as a whole have had to time to launch and gain some ground on the most established consumer-facing cryptocurrency trading application. Payments company Circle made its own cryptocurrency investment application, Circle Invest, available to customers in 46 states earlier this week. This comes on top of Circle’s acquisition of cryptocurrency exchange Poloniex, another U.S.-based cryptocurrency exchange, to the tune of $400 million. Circle Invest joins a host of competition offering ways to invest in cryptocurrency, from Square Inc., UK-based digital bank Revolut, and Robinhood. Several of these companies, including Circle and Robinhood, are offering cryptocurrency investment with no commission in the hopes that attracting customers away from Coinbase, whose user base recently hit 20 million, will allow them to upsell their suite of financial service products outside of cryptocurrency to new customers.
Amazon put out a bid to banks to co-create a checking account-like product for consumers
JP Morgan Chase and Capital One are both reportedly in talks with the tech giant. As for Amazon, partnering with a bank to create a checking account product could lower its costs by reducing the transaction fees it pays to financial institutions as well as give Amazon more direct insight into consumers income and spending habits. Additional financial information, like direct insight into a consumer’s bank activity, can help Amazon identify when a customer might be experiencing a big life change — like going to college or becoming a new parent — or, rather, when it’s easiest for Amazon to create customer loyalty. Simultaneously, Amazon wouldn’t have to take on the burden to fully license itself as a bank. In this way, tech companies might be incentivized to partner with banks, rather than seeking out to disrupt the financial industry themselves. Still, some regulators have reportedly mentioned the idea of rewriting the rules around the separation of financial services and marketplace. Only time will tell.
Thomson Reuters in Analyzing Feelings About Bitcoin on the Internet to Help Inform Investors’ Decisions
For investors, cryptocurrencies are like the Wild West. In a space where there are no experts or authorities, veterans and newcomers alike are keen to find any advantage that can deliver a greater return on their cryptocurrency investments. It should be appealing to investors then, that earlier this week, media and information company Thomson Reuters released a new product that uses sentiment analysis of cryptocurrency news and social media posts from around the web to give investors insights into global attitudes about bitcoin to inform their investing decisions. Housed under Reuters’ MarketPsych Indices, an in-house behavioral economics research firm, the sentiment feed will reportedly use “AI to analyze more than 400 sources of data, scouring news articles and social media posts in search of actionable insights.” The product will help investors identify opportunities to hedge or create buy-sell orders according to the shift of specified indicators.
Smaller Banks Suffer Uptick of Credit Card Defaults
For consumers, access to credit has been rising over the last few years. Now, at small banks at least, it seems like consumers may have taken on more debt than they could chew. According to the Wall Street Journal, small banks pushing credit cards to consumers with perks competitive with cards offered by larger banks are now experiencing a higher level of defaults. While this could simply speak to the amount of credit consumers can now access at the click of a button, with loans and credit options offered everywhere from PayPal, to Amazon, to personal finance management applications, some think this trend could be a foreshadowing of a downturn to come.
For Institutional Dollars Interested in Investing in Blockchain Technologies, the Options Continue to Grow
Blockchain Capital has raised $150 million for a new fund — making it potentially the largest venture capital fund raised dedicated to cryptocurrency and blockchain technologies, according to Axios.
The fund is positioning itself to expand the investment of institutional dollars into the new wave of technology, while still delivering returns to investors in dollar form, rather than a digital token. Meanwhile, institutional money is also finding its way into the cryptocurrency space via the growing number of trading firms moving into the space, from DV Trading, Virtu Financial, Jump Trading, and now Jane Street, as reported by Business Insider. Because trading firms make more money in volatile markets, they are especially attracted to the current state of cryptocurrency.
