In the next few years, VCs will no longer receive “free money” from financing early-stage crypto startups, so they will have to select projects more carefully. About it declared opinion leader Cobie, also known as Crypto Cobain.
“The shoot-and-pray VCs will go bust, losing everything. The successful ones will have a combination of highly concentrated primary investments and secondary investments with an understanding of market turns,” he added.
Ari Paul, founder of BlockTower Capital crypto fund, backed Cobie. According to the expert, the market has already reached its highs for a year.
Current valuations are based on past rounds that have involved a small percentage of project tokens. As an example, he cited XRP token sales – the organizers never managed to sell even 5% “to 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 estimates come from a small group of crypto insiders/VCs who are hoping to get out. There is little or no demand to buy the tokens they own. […] We get exorbitant prices. […] These 5% are exchanged back and forth at higher prices, but the remaining 95% is actually not tradeable.”Paul explained.
According to the founder of BlockTower Capital, only a small group of projects have a different state of affairs. As a result, the price dynamics of “zombie startups” is observed – the price remains high, but without liquidity.
He emphasized that it is even correct to compare the situation with fictitious trading (wash trading), when the feeling is artificially created that the asset is in demand and grows in price.
Paul noted that it took years for XRP whales to sell off their stakes at market prices.
The Block’s vice president of research, Larry Cermak, suggested that the next two years will 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 capital funds with total capital over $10 billion compete for $50 million seed rounds, and none of them buy tokens in the secondary market”he explained.
As a reminder, Pantera Capital raised $1.3 billion to a blockchain fund with a focus on Web 3.0.
Previously, Haun Ventures raised $1.5 billion in two Web 3.0-focused crypto funds. The firm is associated with former Andreessen Horowitz general partner Cathy Haun.
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