• Smith has been involved in the crypto space since 2012 and says the institutional approach to the sector is remarkably different in 2021
  • There’s too much happening at once for this to be considered a bubble, Smith says

“Some nerds got together and created something weird. I wonder what’s going to happen to it?”

That’s Peter Smith, CEO of the London-based Blockchain.com, when he candidly recalled the reception investors gave him when he and his team did their initial rounds of Series-A pitches back in 2012. At that time, the company’s slide deck had no financial section. The price of bitcoin was somewhere between $15.25 and $7.20, with a face-melting crash equating a drop of $2 to $5.

Smith mused that 2012—which you could call the era of ‘antiquity’ in the cannon of crypto—was similar to where he sees the NFT space today. It was possible to raise money, in modest amounts, but there was still skepticism and uncertainty. Terms like asset classes and ecosystems weren’t in anyone’s vernacular. 

“You had to sell people on the whole ecosystem and the asset class existing and whether or not it’s important,” Smith said. “Now, you don’t need to sell people on that.”

Liquidity fragmentation

Smith said that one of the biggest changes he’s noticed in the market in the time since his initial roadshow to raise the Series-A is the “fragmentation of liquidity.” This isn’t at all a bad thing, he says, because students of crypto history might remember what happened when Mt. Gox, which had 90% of the market, collapsed after an epic hack and executive fraud. 

“It’s made the space a lot more resilient,” he said.

Indeed, 2021 is a very different time than 2011 when Blockchain.com was founded; 2012 when Smith & Co. did their initial fundraising rounds; or 2017 when Blockchain.com closed its $40 million Series B round. 

When considering an IPO, bankers look at the market conditions before launching. Suitability is key, IPO in a bubble and the stock will be vaporized once the bubble bursts. Likewise, IPO in a bear market and the company will be perpetually undervalued. 

Smith doesn’t like the word “bubble” as a descriptor, for now or then—2021 or 2017. 

“It’s funny. If you were to have invested $1,000 in every ICO, and you would have held those positions to today, you would be an extremely successful angel investor—and there was a lot of terrible stuff.”

Forbes called 2017 as bitcoin’s ‘IPO moment’. Prematurely, perhaps, as we know now that one of the only reasons that publicly traded blockchain-industry vehicles like bitcoin ETFs got over the finish line is because 2017 happened, regulators are confident everyone learned their lesson and it won’t happen again.   

Irrational exuberance

“I don’t think we are in a bubble. It’s not like there’s one thing driving it. You can see huge institutional adoption of bitcoin, a quite big NFT space. There’s a lot of trends happening inside the ecosystem, so it feels more sustainable than other sort of market cycles,” he said. 

But does that mean we are any closer to getting an answer on the Blockchain.com IPO? As, after all, the successful (if understated) public listing of Coinbase might set the stage.

“If Coinbase is massively successful, it creates space for a lot of other offerings,” is the best we can get. Perhaps fair, as informed minds have pointed out all the regulatory challenges that still lie lurking in the space despite the enthusiasm.

Crypto does, as Smith puts it laconically, suffer from “irrational exuberance.”

  • Blockworks
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    Sam Reynolds is a Taipei-based reporter, covering digital assets and regulation throughout Asia. Before joining Blockworks he was an editor at Forkast News and an analyst with IDC.