What Are Crypto Venture Capitalists (VCs) Investing in This Bearish Market?

What Are Crypto Venture Capitalists (VCs) Investing in This Bearish Market?

(Image credits: A Golden Bear Market by Anndy Lian)

 

The value of a cryptocurrency can be influenced by various factors, including news about the cryptocurrency and its underlying technology, government regulations, and overall market conditions.

The market can also be influenced by investor sentiment, which can be affected by a wide range of events.

There are many different types of investments in the cryptocurrency space, and the popular specific investments can vary over time. In general, some of the most popular types of cryptocurrency investments include:

Bitcoin: Bitcoin is a decentralized cryptocurrency that was the first of its kind. It is often considered a store of value and is widely recognized and accepted as a form of payment.

Ethereum: Ethereum is a decentralized platform that runs smart contracts, which are applications that execute automatically when certain conditions are met. It is also used as a platform for building decentralized applications (dApps).

Decentralized finance (DeFi) tokens: DeFi refers to financial applications built on the blockchain and decentralized, meaning that they are not controlled by a single entity. DeFi tokens are often used to access or participate in these applications.

Security tokens: Security tokens are digital assets representing ownership in an asset, such as a company or real estate. They are subject to federal securities laws and are often issued through initial coin offerings (ICOs).

Stablecoins: Stablecoins are cryptocurrencies that are pegged to a stable asset, such as the US dollar, to reduce price volatility.

There are many different investment theses for cryptocurrencies. Some people believe that cryptocurrencies have the potential to replace traditional fiat currencies. In contrast, others think they will be used primarily as a store of value or a means of exchange.

Still, others believe that the underlying blockchain technology has the potential to revolutionize a wide range of industries, from supply chain management to identity verification.

These Are Some Specific Investment Theses for Cryptocurrencies:

The use of cryptocurrency as a means of exchange: Some people believe that cryptocurrencies will eventually be used as a primary means of exchange, replacing traditional fiat currencies.

The store of value thesis: Some people believe that cryptocurrencies will eventually be used as a store of value, similar to gold.

The blockchain revolution thesis: Some people believe that the underlying blockchain technology has the potential to revolutionize a wide range of industries and that investing in cryptocurrencies is a way to get in on the ground floor of this technological revolution.

The “greater fool” theory: Some people believe that the price of a cryptocurrency will continue to go up as long as someone is willing to buy it at a higher price, even if there is no intrinsic value to the cryptocurrency. This is sometimes referred to as the “greater fool” theory of investing.

Venture capitalists (VCs) are investors who provide capital to early-stage companies in exchange for equity ownership. In the cryptocurrency space and especially after witnessing the fall of FTX, many VCs have started to be interested in investing in companies that are working on infrastructure and applications for the blockchain, rather than investing directly in cryptocurrencies themselves.

Some Specific Areas of Interest for VCs in the Cryptocurrency Space.

Blockchain infrastructure: VCs have invested in companies working on building out the infrastructure for the blockchain, such as companies that are developing new consensus algorithms or building out decentralized storage solutions.

New blockchains get good support too. Shardeum is the world’s first EVM (Ethereum Virtual Machine)-based sharded blockchain mainnet.

With dynamic state sharding technology, the blockchain can linearly scale and increase TPS (transaction per second) with every node added to the network.

The network can maintain low gas fees indefinitely. It was co-founded by Nischal Shetty, a co-founder of WazirX, India’s largest crypto exchange by trading volume.

They have raised $18.2 million in a seed funding round from more than 50 investors, including Jane Street and The Spartan Group joined this seed round along with Wemade and others.

Web3 solutions: Web3, also known as Web 3.0, is the next iteration of the World Wide Web, and it is built on blockchain technology. It is designed to be more decentralized, secure, and open than the current Web.

VCs are looking for projects that align with the core principles of Web3 and have the potential to drive its adoption and growth. This is another rising trend.

The Venom Foundation, a Layer-1 blockchain licensed and regulated by the Abu Dhabi Global Market (ADGM), and Iceberg Capital, an ADGM-regulated investment manager, have announced a partnership to launch the Venom Ventures Fund (VVF), a $1 billion venture fund.

The fund aims to invest in innovative protocols and Web3 dApps, focusing on long-term trends such as payments, asset management, DeFi, banking services, and GameFi.

The VVF will be blockchain-agnostic, meaning it will not be limited to any specific blockchain and will invest in projects based on their potential regardless of the underlying blockchain. The fund aims to become the leading supporter of next-generation digital technologies and entrepreneurs.

I noted that the VCs in my network are also looking at blockchain applications.

VCs have also invested in companies that are using the blockchain to build new applications, such as supply chain management platforms, decentralized finance (DeFi) platforms, and decentralized identity solutions.

Interoperability and cross-chain solutions, for example, aim to enable different blockchain networks to communicate and interact with each other and are also one of the top investment choices.

When I showed this article to some of my friends before publishing, they asked me why didn’t VCs consider investing in crypto exchanges.

The truth is that most of the VCs who understand how the crypto market works would know that exchanges are facing tremendous stress from the regulators. Having a license does not necessarily mean good, honestly. There are new travel rules that will tighten how crypto moves.

The new rules may even force DEXs to new unknown territories where the realization of profits can be deemed a nuisance for many investors. The older existing exchanges usually have very high operating costs, overspending habits on marketing, sponsorships, and staffing.

Moreover, the valuation is way too high for a good entry point, in my humble opinion.

Therefore, I believe investing in blockchain infrastructure and applications will support the development and growth of the cryptocurrency ecosystem and potentially generate more sustainable returns for its investors in this bear run.

It is also important to note that VC investment in the cryptocurrency space is just one aspect of the broader cryptocurrency ecosystem.

There are many other types of investors, such as hedge funds, family offices, and individual investors, who may have different investment theses and strategies.

Having said this, there are still many opportunities in this volatile market. I commented in the South China Morning Post yesterday, “Gold may be a safe haven”, but there were many other [crypto] opportunities elsewhere for investors “to profit from price fluctuations.”

Take a recent market movement, for example. A fellow investor in Singapore reacted quickly to short bitcoin after the US report of 6.5% CPI inflation. He made money. During the same week, he noted that the resistance level had hit its low and would bounce upward soon.

He injected another $10m to long it. Bitcoin went over $21,000. He made money again. And when he heard rumors that PBOC might start to print more money as a stimulus, he sold his crypto holdings into Chinese A-shares as he saw a higher upside in the longer run.

As a licensed fund manager and a VC myself for over a decade, this is my humble note to all.

“Believe in the underlying technology, aim for community growth and ride on the right waves for the best crypto returns.”- Anndy Lian.

Not financial advice, of course.

 

 

Source: https://hackernoon.com/what-are-crypto-venture-capitalists-vcs-investing-in-this-bearish-market

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Cryptos crumble but VCs remain gung-ho on future prospects

Cryptos crumble but VCs remain gung-ho on future prospects

Venture capitalists (VCs) have poured billions into crypto and blockchain startups this year, especially into the Web3 and Ethereum layer-2 scaling solutions space, despite apparent overall bearish sentiments.

According to a report compiled by financial services and investment management firm Galaxy Digital, Venture Capitalists (VCs) have invested over $10 billion in crypto startups in the first quarter of this year.

Just earlier this week, VC giant Andreessen Horowitz announced the close of a $4.5bn crypto fund that focuses on Web3 startups.

Also, a group of former executives from Binance, one of the largest global cryptocurrency exchanges, announced a $100-million venture fund called Old Fashion Research earlier this week, to bring greater crypto adoption to growing markets like Latin America and Africa.

Singapore-based VC firm NGC Ventures also launched a $100-million fund dedicated to high potential Web3 projects and metaverse economies.

According to experts, blockchain and not crypto, is the underlying reason for these investments, with crypto being one of the use cases of the blockchain. The possibilities of new use cases, Web 3.0, and accelerated adoption of blockchain technology – all add to the uptick in investments with scale, growth, and returns all on the horizon.

Roderik van der Graaf, Founder of Lemniscap, says the high degree of market volatility that crypto markets are currently experiencing can elicit fear among some investor categories and undercut overall ecosystem sentiment in the short run. However, VCs generally view the market landscape with a wider aperture and execute a consistent, measured approach to building their portfolios. Usually, a foundational market thesis guides their investment rationale.

van der Graaf, the founder of the investment firm specializing in crypto and blockchain technology, added that market downturns do not undermine this thesis in the short term, and in fact, can actually serve as a long-term cleansing force, recalibrating the market equation with fundamentals rather than unfounded collective psychology.

Some of the best projects will emerge during these testing times, and Lemniscap will continue to back high-potential startups as they evolve into high-performance protocols and platforms, said van der Graaf.

Jenny Zheng, Business Development Lead for Bybit NFT Marketplace and co-founder of Blockcast Ventures, said VCs invest more during a down market and grow them in the bull market because in an upward market everything is overpriced, especially, in the crypto world.

“When it goes up, it is like 100 times, when it goes down, it could be down by 99 percent, so the entry point is much more important compared to the traditional finance world,” he says.

Zheng further says that in crypto, there are always new things coming out, from ICO IEO IDO INO to Gamefi, Defi, and NFT. “Following the new trends and getting involved at an early stage is the key. VCs are following the trends too. Defi, Gamefi, and NFTs are the top choices and they are here to stay for many years to come,” according to him.

Sam Kim, CEO of Sukuma Ventures and founder of Gochapaa, a crypto wallet based in Kenya, says the main reason for VCs pouring investments into blockchain companies is because of investors’ enthusiasm to search and deploy fresh capital into innovative technologies and frontier markets where the innovation adoption is still at its infant stage.

“Despite the growing concerns in capital markets from the hawkish sentiment of the US Fed and ongoing conflict in Ukraine, the search for growth is never-ending,” Kim says.

Anndy Lian, Chief Digital Advisor to Mongolian Productivity Organisation, says other asset classes are also not doing well and some of them might take a much longer time for recovery. Crypto, on the other hand, has been proven to recover relatively faster.

“Secondly, blockchain and crypto are still the talking points in the tech industry. The future growth is very promising. I see with my own eyes that traditional fintech companies are rebranding themselves into crypto, jumping onto the bandwagon,” he says.

Lian says the number of projects will surely increase given the huge influx of new money with NFTs and Game-fi continuing to be their favorite options.

“We are not only talking about investors putting their money into companies in the big old economies. Investors are heavily pouring into Cambodia and Kenya too for instance. We are seeing good innovation at work in the crypto space,” Lian says.

Raj Kapoor, the chief advisor of crypto advisory firm Acryptoverse, says those enjoying the party are blockchain technology upstarts, trading platforms, Web3, and even the metaverse.

“Founders are now in a position to pick and choose investors because so much capital is looking to invest in these companies. As a result, founders can take advantage of investors that offer more than just money,” Kapoor says.

Jawad Nayyar, co-founder of Pakistani fintech firm PropTech, says over the last five years, NFTs and cryptocurrencies have gone from a Ponzi scheme to a gambling tool and a highly volatile asset to now finally being recognized as a legitimate virtual assets of value.

“In times of monetary expansion, high inflation, and a huge currency devaluation, the private sector now considers cryptos as a hedge against such economic adversaries,” Nayyar says.

As seen in the early stages of Web3, not all experiences make sense or will work with brand longevity, said Michael Gaizutis, founder and CXO of design agency RNO1. However, by taking that next step and investing in great design partners, investors will feel more confident and users will feel more central to the concepts they take part in, he added.

 

Original Source: https://www.moneycontrol.com/news/world/cryptos-crumble-but-vcs-remain-gung-ho-on-future-prospects-8600621.html

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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