Trump Rings in a New Era for Crypto with Plans for Government Stockpile
Plus, CoreWeave's S-1 sparks IPO Momentum
The Main Item
Crypto Industry Awaits the ROI From Its Election Investment
The Trump Administration was supposed to bring about the golden age of cryptocurrency investing, though as with all things Trump, it’s been hard thus far to separate the serious policy questions from the noise and the profiteering.
Crypto boosters spent at least $131 million on the 2024 election and got the result they wanted, but then Trump’s first crypto move was to launch his own memecoin along with one for Melania — exactly the kind of corrupt game that legit crypto operators want to get away from.
This week the chatter was all about President Trump’s proposed crypto reserve, though the official announcement of the initiative Thursday evening from David Sacks, Trump’s crypto and AI czar, seemed to muddy the waters even further. A White House executive order created a Bitcoin strategic reserve that will contain previously seized bitcoins, but Sacks said no taxpayer money would be used to fill it.
Instead, the administration will pursue “budget-neutral strategies for acquiring additional bitcoin, provided that those strategies have no incremental costs on American taxpayers.” A secondary digital asset stockpile will hold other crypto currencies seized in legal proceedings.
Trump’s initial comments about the reserve produced a short-lived crypto rally, but Bitcoin and its cohorts have otherwise been falling steadily after peaking in December, and took a fresh turn south on Friday.
More clarity on key policy questions could emerge at Trump’s crypto summit Friday, led by Sacks. A VC and crypto investor, Sacks denied that he’d profit personally from a strategic reserve, stating on X that he’d sold his crypto holdings.
Commerce Secretary Howard Lutnick, for his part, faces important questions about his relationship with Tether, the stablecoin that critics say has become a preferred tool of international criminals. Cantor Fitzgerald, where Lutnick was CEO for many years, owns a 5% stake in Tether and serves as custodian for its collateral.
A fascinating Wall Street Journal story this week detailed the pitched battle now playing out between Tether and Circle, a stablecoin led by Silicon Valley veteran Jeremy Allaire.
The clash perfectly encapsulates the debate in the industry: Tether wants crypto to remain deregulated and anti-establishment, and accuses Circle of spreading dirt about it and pushing for regulation. Circle, a success story for VC backers like General Catalyst and Accel, wants integration into the mainstream financial system.
Stablecoins open the way to crypto currencies actually functioning as currencies and being used for regular commerce — and thus how they are regulated will have a lot of consequences.
VCs are excited about stablecoins and crypto infrastructure startups.
“Stablecoins very organically strengthen the dollar globally as more institutions leverage them for global trade and settlement and more consumers use them to protect their savings from inflation,” said Latif Peracha, a general partner at M13. On the Circle and Tether feud, Peracha lamented Tether’s “brand issue” but noted that it was a high-performing business, with $13 billion in net income coming in last year, while Circle is viewed as “safer” since it’s more integrated into the US.
Outside of Circle and Tether, investors talked up the Ethena protocol, which offers a stablecoin tethered to USDe. Other companies like Bridge, which recently exited to Stripe, and BVNK, had investors excited since they provide the base infrastructure for stablecoins to function and trade.
“I think that concept behind stablecoins is just what a lot of blockchain enabled businesses are,” said Mike Dempsey, the managing partner at Compound. “You either introduce smart contracts to remove intermediaries that make different types of services more expensive, or you use token incentives in order to build networks that normally would be very expensive for centralized players to build.”
Beyond stablecoins, Dempsey and Peracha were bullish on blockchain startups that are building decentralized infrastructure, like Helium, a decentralized telecommunications network, and Hivemapper, where users can earn tokens by offering real-time map data from their dash-cams.
What the regulations on stablecoins and other currencies might look like remains unclear, beyond looser in general. President Trump’s pick for the SEC, Mark Uyeda, on Monday announced members of his new crypto task force, which will host roundtables to discuss the best approach.
The new SEC has already dropped several Biden-era investigations into crypto-adjacent companies like Yuga Labs, the makers of the Bored Ape Yacht Club NFTs. A bill introduced in Congress this week could make it easier for crypto firms that have found it hard to open bank accounts.
The net of it all is a tentative bullishness among crypto VCs.
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Newcomer Podcast
Best Crypto to AI Pivot Ever
In this episode of the Newcomer Podcast, we dissect why VCs are mad about Trump’s plans for a strategic crypto reserve. Even the biggest boosters and loudest voices for deregulation around crypto have been caught off guard by the president’s Truth Social post advocating for other altcoins to the promised Strategic Bitcoin Reserve, calling the move a blatant enrichment scheme for coin holders and friends of the President.
Next, we take a closer look at the thawing of the IPO market. We unpack CoreWeave’s S-1 and examine why the biggest generative AI IPO of the year so far has a lot at stake with big tech customers. We then discuss Anthropic’s latest funding round, its whopping $61.5 billion valuation, and the deeper issue of when we should truly declare AGI’s arrival.
Chapters
01:09 — The Crypto Strategic Reserve And Crypto Grift
09:07 — CoreWeave’s Wonky IPO Brings Real Returns For Generative AI
13:37 — Anthropic’s New Funding Round: Can Foundation Model Cos Justify These Valuations?
One Big Chart
Startups Are Staying Even Leaner As They Grow
If you read this newsletter and listen to the podcast, you’ve probably been privy to the discussions around how startup teams are getting much leaner thanks to productivity-boosting AI tools like Cursor. Fresh data from Carta this week confirms that startups on its platform have been keeping their teams smaller even as they raise additional funding rounds.
Series A rounds saw the biggest drop in average team size: where startups that raised an A back in 2022 had about 25 employees on average, by 2024 they were getting by with just 15.
According to Carta’s Head of Insights Peter Walker, this phenomenon is caused by a couple of factors: the venture pullback in 2022 made startups learn to do more with less, and AI tools make teams much more efficient. “I think a lot of the drop from peak years is founders spending money more carefully and hiring only what they need — but I bet AI is making those current team members more productive which puts off the need to hire many more folks.”