The crypto market from the first-level perspective of Eastern and Western VCs: narrative for narrative's sake, boring

Author: Lao Bai, Investment Research Partner, ABCDE

Speaking of which, it seems that this is the longest time Twi has been broken. There is no other reason, as a blogger who never picks up the wide, every time you write something, you essentially need to be driven by the desire to express, and in the market in recent months, it is difficult for people to give birth to this kind of Feel. Although the performance of the decadence of the secondary market is not small, the feeling of the primary market may be the main reason for this lack of expression

However, I have recently observed some phenomena and some thoughts, which may be relatively long, so I plan to split them into three or four articles, which are "the market from the perspective of VC in the East and the West", "new signs of RWA", and "some things worth talking about on ETH and Solana"

Let's talk about the first topic today

In the past few weeks, I have talked to several Asian peers and found that they have all entered a "pause", or "conservative", investment model.

Our most recent shot was in January, and several of our peers are similar, and there are many cases that don't make a shot for two or three months or even longer.

As for the feeling of the market, the word "boring" may be the most appropriate adjective, or temporary "consensus".

This sense of boredom is not entirely linked to the second level. I clearly remember that after the collapse of Luna, although the bipolar market was sluggish, everyone was still excited about good expansion projects in the primary market, such as ZK, or innovative Defi, Gamfi, and AI. And this sense of excitement, after entering 2025, will slowly not be experienced. The decadence of the secondary market, which is not hot for any narrative for a few days, naturally has an emotional transmission effect on the first level, but a more worrying concern is - have we entered the stage where the "low-hanging fruit" is roughly finished, and since then has entered a window period of long-term adjustment, exploration, transformation, and corresponding severe pain? On this topic, I will expand on it at the end, because the current state of VC in the West is somewhat different from that in the East.

The reason is that we invested in a Defi project in the Pre-seed round last year, and recently in the Seed round. Originally, I pondered that in the current primary and secondary markets, I would be very content to be able to be full. As a result, I didn't expect to overraise millions of dollars, and several European and American VCs rushed to stuff money into it. I was blown away by the results, the project itself was good, but it didn't have the texture of an S-class. Why is it that while we are "dumb fire" in Asia, Europe and the United States are still "firing", what is the reason why they dare to pull the trigger in this valuation?

We discussed it internally and made some irresponsible conjectures, such as:

1. The timing of the establishment of VCs in Europe and the United States is not the same as that in Asia, so the exit cycle is different, resulting in different investment decisions;

2. Asian VCs have the temperament of "small-town problem-solvers", and in terms of yield, they either want to win their peers, or at least outperform BTC (but I believe that few companies can do it in the current market situation - - ), European and American counterparts are more idealistic and long-term, or in other words, as long as they can logically explain to LPs why I invested in this project at this valuation, the persistence of yield is secondary;

3. Pure Deploy Fund needs, after investing in this phase, it is better to raise funds for the next phase as soon as possible, and collect management fees;

The specific reason is unknown, and I can only guess at present, so in the next few weeks, I will make an appointment with a group of European and American VC Partners and Researchers to chat, in addition to exchanging views on the market, I also want to ask for advice directly on the above issue in person, and then collect information and then come to Twi to Update.

Then I would like to take this opportunity to discuss with you what the future of Crypto is.

First of all, whether it is me or ABCDE, I have never wavered in my long-term belief in Crypto Bullish, which can even be regarded as a "belief", otherwise I would not be engaged in this profession full-time. But in the short to medium term, we're at a crossroads, one that I'm not sure is similar to what it was before the Defi Summer in 2019, so I'm going to talk to you about it.

The reason is that I have been listening to AlliaceDAO's podcast recently, and the three points of view in it have resonated with me a lot.

1. Qiao said that his current feeling is similar to that of 19 years, and he doesn't know what will happen to Crypto next, until the appearance of Defi Summer in 2020 made his eyes shine and find his direction;

2 is that they think that Crypto has only found one PMF for so many years, that is, finance, and more specifically, trading (Dex, Cex, Perp), lending, stablecoins, Mint (asset issuance, e.g Pumpfun);

3 is that they gave a lot of their AI x Crypto Start Up suggestions, if the Crypto elements in the project are too far-fetched, then it is better to directly remove Crypto and directly do pure AI, as a result, 30% of the projects really removed Crypto and became pure Web2 projects;

About 1 - Although I have entered the circle in 2019, I am just simply speculating in coins, to be honest, I am not sure if the VC at that time had this "boring" feeling now, but in my impression, at least IEO is popular, EOS is exploring the direction, Starkware put forward the concept of ZK, many projects of Defi Summer in 20 years should also be established in 18-19 years + voted out, then theoretically the experience of the primary market should be better than now, in other words, At that time, everyone's belief in "the big one is coming" should be higher than now?

About 2 - is an echo of 1 and my biggest concern in the short to medium term, i.e. - whether we have come to a crossroads where the low-hanging fruit is roughly plucked, which is different from 19 years.

If the biggest PMF of Crypto on the Utility is finance, then the micro-innovation that Defi Summer+ has continued to iterate in the next few years has basically reached a boundary today.

The opposite of Utility is also what Crypto is good at - that is, the narrative direction, Meme is undoubtedly the best representative, and Pump.FUN will push this direction to a boundary in 2024.

And then in the last few years, when Utility and Narrative weren't sure what to do, our circles were at least able to roll up Infra. From ETH to EOS to Solana and then to Aptos, Sui...... I'm wondering, Solana has Firedancer this year, Monad and MegaETH will most likely be launched on the mainnet, have we also reached the boundary in terms of blockchain Infra scaling?

ABOUT 3 - A crossroads, all three roads have reached the boundary, so is there only one last way, which is "the modularity of blockchain", which is related to the third point above, I also heard similar insights in the YC podcast.

The modularity mentioned here is not the modularity of Celestia, but the blockchain technology as a whole, abstracted into a module, and inserted into a start-up as a function, similar to AI.

The vast majority of Crypto projects we see now are completely based on Crypto, or Crypto for Crypto's sake, and are not designed to solve a real-world problem. It's called Crypto Native, but if it's not good, it's not out of the circle at all, and it's self-congratulatory in the circle.

The Web2 AI venture capital circle is expected to have similar problems, and many projects seem to be "AI for AI's sake" rather than solving a specific real-world problem.

In the future, will the primary market produce some kind of integration of Web2 and Web3, or an encounter? In the process of solving the problem, the part that needs to use Crypto is added to the Crypto element, and the AI element is added if AI is needed, but the original intention and purpose are completely unrelated to Crypto and AI. Just as Meituan Takeaway uses 5G, platform software, big data, and AI task allocation...... But it's essentially a project to solve the problem of eating.

If the next big stage of Crypto is in this form, will everyone be bored? Can a series of current forms based on the Crypto Native industry chain, such as Crypto VC, exchanges, and studios, continue?

At present, there are more and more payment and RWA-related projects in the primary market, which are more or less in line with the idea of 3, just recently studied Ondo's Global Market, and also talked about a few RWA projects, and the next article is dedicated to the new direction of the RWA track.

Source: ABCDE