In a registration statement filed with the Securities and Exchange Commission (SEC), social media platform Reddit revealed that it has invested excess cash reserves in the cryptocurrencies Bitcoin (BTC) and Ether (ETH). In addition, native MATIC tokens of the Polygon blockchain were acquired for the issuance of non-fungible tokens (NFTs).
Reddit is one of the largest social media networks with approximately one billion active users per month. As part of its planned initial public offering under the ticker RDDT, the company will be required to file an S-1 registration statement with the SEC. A surprising clause in the 230+ page legal document reveals an investment in Bitcoin and Ether. Reddit is also experimenting with blockchain technology and NFTs.
Investment amount is unclear
The registration statement states that Reddit has "invested a portion of its excess cash reserves in Bitcoin and Ether." In addition, the platform used Ether and MATIC as payment for the sale of certain virtual goods. The proceeds from these sales were "not material." Reddit did not disclose the size of its Bitcoin and Ether investments.
Diversification into other cryptocurrencies is possible under two conditions. First, the company's board of directors must approve each investment in advance. Second, Reddit can only acquire cryptocurrencies that are not classified as securities. To determine this classification, Reddit will rely on the SEC and the Commodities Futures Trading Commission (CFTC).
Split reactions to Reddit's blockchain projects
Reddit has experimented with blockchain technology through two major concepts. The social media giant created its own series of non-fungible tokens (NFTs): the Reddit Collectible Avatars. Launched on the Polygon blockchain in July 2022, active users were able to create their own avatars. The initial run on the NFTs was significant. Reddit generated $6.85 million from different generations of the collection, according to analytics platform Dune. Over 30 million unique users purchased a digital avatar. Ownership of leading NFT collections such as Crypto Punks and Bored Apes is typically limited to less than 10,000. The Reddit NFTs on the other hand consist of a large number of collections with thousands of NFTs each. Despite a massive drop in speculative trading volume, Reddit's NFT project can be considered a success.
Trading volume of Reddit collectible avatars on secondary marketplaces / Source: Dune
The company's other blockchain endeavor ended less fortunate. Back in May 2020, Reddit introduced so-called "community points" on the Ethereum blockchain. Users would be rewarded for positive contributions, similar to "karma" points. The community points could then be spent on premium features. For example, members of the "r/CryptoCurrency" subreddit received MOON tokens. Three years after the experiment began, Reddit announced that it was discontinuing community points due to regulatory concerns. The prices of individual tokens, which at one point were trading at a market cap of over $50 million, plummeted by over -90%. Speculators lost thousands of dollars.
CryptoCurrency MOON/USD (daily) / Chart: Tradingview