Circle’s ‘Bebo’ Moment

The crypto company, Circle, has just announced that it is spinning off its Poloniex exchange business.

The Bebo Story

Bebo was founded in 2005 and became the UK’s leading social media company, beating both MySpace and Facebook in its prime.

After the classic pioneer boom in social media, there was a ’shakeout’ stage of failures, mergers and acquisitions. In this case, the major media companies wanted to get into this market and so in March 2008, media giant AOL paid $850million for Bebo.

Only they didn’t understand social media. Its nothing like other media. People are not commodities to be bought and sold. They are communities with clear uniqueness and purpose, and the winners have buzz.

If the buzz leaves, it is extremely hard, in fact impossible for these corporates to rebuild them.

AOL, run by overpaid theoretical strategic consultants and money men would never understand this and not surprisingly failed, only to sell it in two years for peanuts and suffer a total loss. In fact, the original founders bought it back five years later for $1.

The Poloniex Story

When I researched crypto-exchanges in May 2017, Poloniex was responsible for one third of all crypto transactions outside of China, dominating Coinbase, Kraken, etc.

Just when the market started to really boom in 2017, Poloniex was hacked and was in a state of chaos, its founder seemed struggling with the growth. Then in February 2018, the founder sold out to crypto-payments pioneer Circle for $400mil. Many people thought he was crazy taking only $400mil but he was very smart. Like Bebo’s founders. Perfect timing.

So now Poloniex, the already damaged and abandoned exchange is part of a crypto company powered by massive American VC cash. $295mil, led by Goldman Sachs, over six years. I am sure they thought this would allow them to scale fast and become a global exchange player to compete with the emerging Binance, Coinbase or Asian dragons. The gods play with the dreams of the blind.

As with social media, its the same with crypto exchanges. One million accounts does not equal one million supporters. And when you lose the buzz, they leave you.

I have seen it many times in the Direct Sales industry. Big companies, for instance Sara Lee, want to get into direct sales. They buy an artificially pumped up yet legendary brand like Nutri-Metics only to find it dying and unable to be built.

The Takeaways

I suggest that Poloniex will continue on now, but will be irrelevant. Traders dont care. Institutions won’t trust it compared to its competitors. The only question is has this killed Circle as well?

For everyone else, the key takeaway is that crypto is at the end of its shakeout period and is entering new era; a second growth boom. Just as when Facebook overtook MySpace, Apple iPhone over Nokia, Google over Altavista. 2020 will be a big year and 2021 will show major winners and losers.

Exciting times. Find the winners in the niches. Facebook understood that when it bought WhatsApp and didnt change it to Facebook Now or something and Google, when they built YouTube and resisted the desire to call it Google Video.

At Dacxi we are very focused on our retail niche. We are not interested in the payments space like everyone else. We are not in the current trader or institution- dominant markets. Our model is so different that the techies, money boys and digital marketers must laugh at the level of our personal service for people. It’s because they don’t understand who has the money in the retail wealth world. It’s not the unshaken Millennials or tech-empowered GenZ who are under 25. Our predominant market is the over 40’s. Sceptical and not expert in tech, yet they have one thing that’s important — 85% of all wealth.

Dacxi is easy, secure and personal. We like that.