LooksRare Looks Good

Good morning. Today we have an investment in Citadel Securities by web3 fund Paradigm, multiple Lightning Network integrations, NFT marketplace competition, and more!

Bonus Content Coming: I'm targeting early next week the end of the month to have my notes out from Messari's Crypto Theses for 2022. I'll include a link to my notes in this newsletter, however, the full report is definitely worth a read.

Market Update (as of 8:05am ET):

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Top 5:

1. Citadel Securities to Receive First Outside Investment
Citadel Securities, a financial markets maker, that handles ~27% of trading that occurs in the US stock market is taking its first outside investment from Sequoia Capital and Paradigm. Citadel is well known for the practice of payment for order flow, meaning they pay brokers like Robinhood to send their users' orders over to Citadel. The company fell under some regulatory scrutiny last summer after Robinhood halted users' ability to buy GameStop stock during a internet driven rally in the meme-stock. Some investors accused Citadel of ordering the halt in trading in order protect an investment in Melvin Capital, a firm that had heavily shorted GameStop. The background here is somewhat interesting to consider. Citadel, a huge player in traditional finance with a less than stellar reputation, is allowing one of its first outside investments from Paradigm, a crypto/web3 investment fund. A potential move into crypto markets for Citadel would likely be unwelcome (see replies to the below tweet), but could also be very profitable for the firm.

SSS (sat-sized summary): Citadel Securities is taking its first outside investment from Sequoia Capital and Paradigm (crypto/web3 investment firm). These investments may signal a move into crypto markets from Citadel, the company known for payment for order flow and its relationship with Robinhood

2. Cash App Integrates Bitcoin Lightning Payments
Cash App, the mobile payments company owned by Block (the company formerly known as Square), has integrated the Lightning Network into its application.

Quick refresher: the Lightning Network is a payment protocol built on top of the Bitcoin blockchain. Lightning was created to address some of the scalability issues of Bitcoin and to allow users to transact instantly and securely off-chain for a lower cost than if the transaction occurred directly on-chain

The feature was rolled out to a subset of users and is being billed in the app as “the fastest, free way to pay anyone in bitcoin." This announcement comes on the same day that Bottlepay, a UK based payments startup, received approval from the Financial Conduct Authority (FCA) "to carry out crypto-asset activities in the UK, making it the first Lightning Network-based firm to win permission from the country’s financial regulator."

SSS: Major mobile payments company CashApp is allowing users to transact in bitcoin via the Lightning Network

3. NFT aggregator Flip raises $6.5 million in seed funding
Flip, the NFT marketplace aggregator, has raised $6.5 million in a seed funding round led by Distributed Global and Chapter One. The company's value prop is to provide users with a view of NFTs across all marketplaces including data points such as floor price and trading volume. The platform will also provide users with the ability to track their NFT collections in one place and "bundle" separate NFT wallets. Flip will be free to users, but will receive a "minor fee or referral bonus" from exchange partners for transactions that originate from the platform. OpenSea is currently the dominate NFT marketplace with greater than 95% of market share. It would certainly help Flip to see some diversification in the space (see next story).

SSS: Flip is building a platform to aggregate NFT prices across marketplaces and provide users with a single view when making purchasing/trading decisions

4. One Day After Launch, OpenSea Competitor LooksRare Sells Over $100M in NFTs
Is there a new NFT marketplace in town? Yes. And is that town big enough for the two of 'em? Probably. LooksRare, a more decentralized NFT marketplace, launched on Monday and has already hosted $105 million in trading volume during a 24 hour period. For comparison's sake, OpenSea, the dominant NFT marketplace, did $169 million in trading volume during a similar period. LooksRare has entered the market at a very favorable time. NFTs have exploded in popularity over the past year and OpenSea has faced little real competition from other marketplaces. Additionally, OpenSea has been a popular target for criticism in the crypto community with common critiques being the lack of a token, inconsistent enforcement of intellectual property claims, and platform fees routed to the OpenSea team rather than users. While the timing is certainly ripe for LooksRare, some are questioning if current trading volumes are sustainable. LooksRare is currently rewarding buyers and sellers on their platform with a token (LOOKS) based on volumes traded and will continue to do say for the next 30 days. This is incentivizing users to wash trade assets, which essentially means you sell an asset back and forth between a wallet that you control in order generate trading volume that isn't legitimate.

SSS: New non-fungible token (NFT) marketplace, LooksRare, is almost matching trading volumes of OpenSea, the dominant market participant, in only its first week of launch. Some are pointing out that LooksRare's incentive structure is encouraging users to "wash sale" assets (trade back and forth between themselves) in order to receive the platform's token (LOOKS)

5. Decentral Park Capital Launches $75M DeFi Fund
Decentral Park Capital is launching a $75 million fund to invest in decentralized finance (DeFi) initiatives. Returning investors are mainly family offices with new investors being mostly institutional according to founder John Quinn. The company has already deployed around $45 million with most investments being "multi-chain" focused. Decentral Park was an early investor in Pocket Network, the crypto infrastructure company.

Top Sharers of the Crypto Top 5:
1. Jake Y. - Greenville, SC
2. Cameron S. - New York, NY
3. Lauren A. - Nashville, TN

Disclaimer: The information contained in this newsletter shall not be understood or construed as financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information provided is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.