Why the Bridge x Stripe acquisition is bullish BTC.

The stated goal of Bitcoin was to create a peer-to-peer cash system—a financial network for exchanging value outside traditional financial institutions. That dream is coming true in a roundabout way.
The financial landscape is experiencing a seismic shift as stablecoins begin to erode the dominance of traditional payment networks like Visa and Mastercard. The recent $1.1 billion acquisition of stablecoin API provider Bridge by Stripe underscores this transformation and signals a bullish trend for Bitcoin venture capital as the largest acquisition to date.

Stablecoins and the Unraveling of Visa and Mastercard’s Dominance

For decades, Visa and Mastercard have held a duopoly over global payment flows, controlling an estimated 90% of transactions (outside of China). Their network lock-in has allowed them to process tens of trillions of dollars in annual transaction volume, taking 2% to 3% off each transaction. Breaking into this entrenched user-merchant flow has been notoriously difficult due to their widespread acceptance, the inertia of user behavior, and service agreements with merchants that lock them into specific networks.

Enter Stablecoins; which mimic the functionality of real-world dollars but operate on crypto rails controlled by new entrants rather than incumbents. Unlike the closed networks of Visa and Mastercard, stablecoins offer an open alternative that doesn’t rely on traditional payment infrastructure.

This shift is the beginning of the end for the duopoly’s stranglehold on payments.

Stripe enters the chat
Stripe, known for its developer-friendly payment solutions leveraging Visa and Mastercard rails, is pushing heavily into stablecoins and crypto. This move not only diversifies its offerings but also challenges existing payment paradigms. Crypto rails offer numerous benefits, including enhanced transparency, faster transaction finality, and global accessibility with minimal KYC (fingers crossed).

As the adoption of crypto-based payment systems grows, Stripe stands to insert itself into the 2% to 3% transaction fees that traditionally went to Visa and Mastercard. This positions Stripe to lay the foundation for any crypto asset to be used on its rails, with stablecoins likely being the most popular.

This development opens the door for Bitcoin to be used as an actual currency for payments and value exchange between individuals. The most significant long-term impact is the removal of network lock-in from Visa and Mastercard, allowing new payment systems to start online and gradually move into the real world.

Challenges and Opportunities in Merchant Adoption
Currently, merchants have little incentive to prematurely adopt crypto point-of-sale systems. Most consumers use cash or debit cards powered by the big two. Accepting Bitcoin or stablecoins is rare in the real world due to limited demand and infrastructure.

With Stripe's purchase of Bridge, we can see a path where providers can develop abstracted debit cards that utilize the most efficient payment rail at any given time, potentially defaulting to a crypto stablecoin. Users could capture savings and benefits, while merchants might enjoy lower transaction fees. There’s a wide design space for innovation here.

$1.1 Billion. The Bat Signal for Venture Capital

Another angle to consider is that this acquisition represents one of the largest crypto-related deals to date at $1.1 billion, and notably, Bridge doesn’t have a token. The company raised approximately $58 million through multiple rounds since its launch in 2022, yielding nearly a 20x return for investors in just two years.

These are returns that venture capitalists, especially those focused on tokens with short lock-up periods, would find highly attractive. This acquisition provides positive social proof that equity deals, potentially with token warrants, can offer outsized returns. Until now, the equity side of venture capital in the crypto space has been cautious.

This development might prompt investors to reevaluate the balance between pursuing decentralized protocols with tokens and investing in useful centralized crypto infrastructure.
Both of these options facilitate a transition away from traditional financial rails and bring forward a Bitcoin standard. Achieving independence from legacy systems and central banks requires collective effort on all fronts.

Conclusion
Stripe’s acquisition of Bridge is a significant milestone that is bullish for Bitcoin and the broader crypto ecosystem. It signifies a shift towards decentralizing payment networks, challenging the long-standing dominance of Visa and Mastercard. Moreover, it highlights the potential for substantial returns in venture capital through equity investments, encouraging a reevaluation of investment strategies in the crypto space.

This move by Stripe not only accelerates the adoption of stablecoins but also paves the way for Bitcoin to be at the heart of a new financial system.


Thanks for reading,
Jake.