In the coming years, venture capitalists will stop receiving ‘free money’ from funding early-stage crypto startups, so they will have to be more selective about projects. This was stated by opinion leader Cobie, also known as Crypto Cobain.
‘Venture capitalists operating on a shoot and pray principle will go broke, losing everything. The successful ones will possess a combination of highly concentrated initial investments and secondaries with an understanding of market turns’, he added.
BlockTower Capital founder Ari Paul backed Cobie. According to the expert, the market has already been at its peak for about a year.
Current valuations are based on past rounds in which only a small portion of project tokens were used. As an example, he pointed to XRP token sales — the organizers never managed to sell even 5% into the market.
Imo, has been over for at least a year, people just don’t realize it. Lots of investments marked at all time highs after series of up rounds that have little value outside the small groups marking. As a “liquid analogy”, XRP, has never been possible to sell even 5% at market. https://t.co/Ay34PXTUXS
— Ari Paul ⛓️ (@AriDavidPaul) April 17, 2022
‘All valuations originate from a small group of crypto insiders/venture investors who hope to cash out. There is little or no demand to buy the tokens they own. […] We are seeing sky-high prices. […] They trade these 5% back and forth at higher prices, but the remaining 95% are effectively not for sale’, — explained Paul.
According to the founder of BlockTower Capital, the situation is only different for a small group of projects. As a result, there is a price dynamic of “zombie startups” — the price remains high, but liquidity is lacking.
He emphasised that the situation could even be usefully compared to wash trading, where it is artificially created the impression that an asset is in high demand and rising in price.
Paul noted that XRP whales took years to sell their packs at market prices.
The Block’s Vice President of Research, Larry Cermak, suggested the next two years would be ‘fun and dynamic’.
All the new VC funds, which are in 10s of billions of fresh capital, are now competing for the $50M seed rounds and none of them buying tokens on the secondary. Should be a fun dynamic next two years
— Larry Cermak (@lawmaster) April 17, 2022
‘All new venture funds with total capital exceeding $10 billion are competing for seed rounds of $50 million, and none of them are buying tokens on the secondary market’, — he explained.
As a reminder, Pantera Capital raised $1.3 billion in a blockchain fund focused on Web 3.0.
Earlier Haun Ventures raised $1.5 billion in two crypto funds focused on Web 3.0. The firm is linked to former Andreessen Horowitz general partner Katie Haun.
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