Earlier this week, the Fix actually said out loud, “Bitcoin has been pretty boring lately.” One day later, bitcoin fell 15% and traded below $8,000 for the first time since June. Oops.
In the Fix’s defense, bitcoin had spent most of the month trading between $10,000 and $11,000. And volatility had reached its lowest point since April.
After the crash, our Adam Sharp wrote a terrific piece for our First Stage Investor members explaining why the price of bitcoin fell – and what you should do about it.
Bitcoin’s fall wasn’t the only big news story this week. In fact, this was the first time in Fix history that a crypto, cannabis and startup story could have been our lead story.
On to the News Fix!
WeWork’s mess needs cleaning up: In last week’s News Fix, we wrote about WeWork postponing its IPO. This week, WeWork CEO and co-founder Adam Neumann resigned under pressure (CNBC). He is staying on as nonexecutive chairman. And his resignation has far-reaching consequences.
Prior to postponing its IPO, WeWork and its bankers were considering laying off one-third of its workforce and shedding business lines that have nothing to do with its core mission (The Information). And postponing the IPO doesn’t necessarily change that plan. Investors (and potential investors) are going to want to see strong proof that the new co-CEOs, Sebastian Gunningham and Artie Minson, are moving aggressively to reshape WeWork.
Gunningham and Minson aren’t the only ones with cleanup work to do. JPMorgan Chase CEO Jamie Dimon bet big on the WeWork IPO – and lost. Dimon has been courting Neumann for years. JPMorgan hasn’t been able to keep up with Goldman Sachs and Morgan Stanley in the competition for the top IPOs. And handling WeWork’s public offering was supposed to be JPMorgan’s ticket back to the bigs. Oops. Now Dimon has egg on his face and an IPO to save (The Wall Street Journal). And it does make you wonder – what exactly did Dimon know pre-IPO? And why didn’t he do more to prevent this embarrassing situation?
While Dimon tries to clean up the mess for JPMorgan, Gunningham and Minson are trying to clean up the mess for WeWork. And in a memo to WeWork employees, the co-CEOs promised to “closely review all aspects of our company with the intention of strengthening our core business and improving our management and operations” (Fortune).
And don’t worry too much about the former CEO. Neumann has joined a strange, interesting and mostly successful club of billionaire founders ousted by their own companies (Forbes).
Home ownership startup gets a $43 million boost: For the purpose of this exercise, let’s assume you’re renting. But you really want to buy a home. One of the biggest obstacles to buying a house is cobbling together enough money for a down payment. But what if your rent – or more accurately, 25% of your rent over three years – could be used automatically as your down payment? And then you’d automatically be eligible for a more classic 30-year mortgage?
That’s the arrangement startup Divvy sets up. And it just raised $43 million in its Series B round. Andreessen Horowitz led the startup’s $10 million Series A round (TechCrunch).
A startup changes the narrative: So what happens when you launch a company and it’s met with instant mockery and infamy and called “America’s worst startup”? If you’re smart, you change the company’s name. You work even harder to get your business off the ground. And you go on to earn another $45 million in venture capital funding (TechCrunch).
House passes bill with historic vote: The U.S. House of Representatives became the first chamber of Congress to pass a marijuana reform bill on Wednesday. The bill, which shields financial institutions from prosecution for providing services to legal (at the state level) cannabis businesses, passed on a bipartisan 321-103 vote (U.S. News & World Report).
This is a terrific moment for the marijuana industry. But that’s all it is – just a moment. Even though the measure is backed by the financial industry, the governors of more than 20 states and the attorneys general of more than 30 states, the bill’s status in the Senate is uncertain at best.
The Senate Banking Committee has indicated it wants to mark up a marijuana banking bill. But it has made no commitment to hearing this bill out. Plus, Senate Majority Leader Mitch McConnell has yet to support a marijuana banking measure. The Senate won’t pass anything unless McConnell is on board. And given the fact he’s all-in on protecting Kentucky’s nascent hemp industry (which legal marijuana threatens), his support isn’t a given.
So let’s celebrate the historic moment. But let’s also remember we have a long way to go.
Australia also sees historic vote: The Australian Capital Territory (ACT), home to the Australian capital of Canberra, has legalized marijuana. In theory, people in the ACT can possess up to 50 grams of marijuana and up to four cannabis plants per household. But much like the United States, marijuana is still illegal at the federal level. So nobody is exactly sure how this law is going to turn out (ABC).
Pennsylvania’s governor wants to legalize marijuana: Gov. Tom Wolf announced this week that he wants Pennsylvania’s legislature to legalize recreational marijuana (USA Today). Wolf’s announcement was unusual in three ways:
- Wolf wants the legislature to legalize recreational marijuana. Most of the states that legalized weed went the ballot initiative route.
- The announcement comes on the heels of a 93-day listening tour by Pennsylvania Lt. Gov. John Fetterman about legalizing pot.
- Pennsylvania is the fifth-largest state in the country. And it would become the second-largest recreational marijuana market behind California (and just ahead of Illinois).
But getting a legislature to legalize marijuana can be tricky. Just ask New Jersey.
Another way to buy bitcoin and ethereum: If you’re seeking proof that bitcoin is still popular, look no further than all the companies that are making it easy to buy it. Robinhood, eToro and Square are already mining this fertile territory. And now you can add SoFi to the list. In addition to refinancing student loans and handling other personal loans, SoFi will allow people to buy and trade bitcoin, ethereum and litecoin (CoinDesk).
Should we be worried about quantum computing? Google may – or may not – have created the fastest computer ever made. Google’s quantum computer (if it’s real) performed a complex mathematical sampling in less than four minutes. It would take a “traditional” computer 10,000 years to perform the same sampling (Vice). So what does this mean for crypto? Here’s the skinny from Decrypt:
What’s more, not only can quantum-computing scientists not break bitcoin yet, they don’t seem too interested in doing so anyway. In fact, one of the most evident use cases for quantum technology appears to be to improve encryption and cybersecurity techniques, according to Google’s own researchers.
But that isn’t to say that there’s no cause for alarm at all. While the native encryption algorithms used by bitcoin and other proof-of-work coins are safe for now, the fact is that the rate of advancements in quantum technology is increasing, and that could, in time, pose a threat.
So one of the greatest technological breakthroughs we’ll ever see may or may not be a threat to bitcoin. I’ve got to admit, I’m liking bitcoin’s chances.
And that’s your News Fix.