Lecture on the State of Crypto VC Investment

Introduction

• Announce the end of the crypto winter.
• Emphasize the role of venture capitalists (VCs) in the crypto industry.

Recap of VC Investment Trends

• VC investment in crypto is tied to BTC price action with a quarter lag.
• Highlight of the investment peak in Q1 2022: $122 billion.
• BTC peaked at over $69k in Q4 2021.

2022 Crypto Crisis

• Numerous crises: 3AC, Terra Luna, Celsius, Alameda, FTX, BlockFi.
• BTC plummeted to 15K; significant negative impact on crypto reputation and VC investment.
• Investment fell consistently for seven quarters.

2023 VC Investment Trends

• BTC saw a rally from 16-18K to 44k in 2023.
• Yet, VC investment continued to fall until Q4, bottoming below $2 billion.

Q1 2024 Recovery

• First 3 months of 2024 showed a 45% increase in VC deals and a 40% rise in capital investment quarter-on-quarter.
• However, the investment is still down 80% from Q1 2022.
• Debate on whether VC investment will catch up with BTC rally.
• Macro-economic factors (e.g., high interest rates) influence investment trends.

Comparison with Fintech

• Fintech peaked in 2021 with $113 billion, fell 65% in the following two years.
• High interest rates affecting both sectors.

Degree of VC Investment Desirability

• Overfunding issues in previous cycles (e.g., a16z's $450M investment in Yuga Labs).
• Current potential signs of over-funding and saturation in VC funding rounds.

Current VC Investment Focus

• Breakdown by categories (Galaxy's report):
  • Infrastructure (24%): Includes staking, sequencing services, etc.
  • Web 3, NFT, DAO, Metaverse, Gaming (21%)
  • Trading, Exchanges, Investing, Lending (17%)
• Rising valuations despite the number of deals being flat.
• High early-stage investment with less focus on well-established later-stage projects.

Conclusion

• Mixed views on whether increased VC investment is beneficial.
• Importance of identifying quality projects despite overfunding concerns.
• Outlook: Future trends depend on macro-economic conditions and continued innovation in blockchain technology.
• Note on saturated market and fragmented liquidity leading to the necessity for diligent research.