How do crypto VCs view 2024? We asked 20 well-known institutions to tell you how to seize future opportunities

Author: Zen, PANews

In 2023, amidst the ongoing global economic downturn and tightening crypto regulations, the crypto industry has demonstrated remarkable resilience. Keywords such as Ethereum's Shanghai upgrade, Hong Kong's new crypto policies, lawsuits against major exchanges Binance and Coinbase, and the craze for inscriptions, along with the strong expectation for Bitcoin spot ETFs, have contributed to a steady recovery in the global cryptocurrency market, which has firmly surpassed a market cap of $1.6 trillion.

According to PAData statistics, Bitcoin has largely recovered from last year's decline, with its price rising to over $42,000 by the end of the year, marking an annual increase of over 158.06%, and a clear upward trend throughout the year.

With a strong performance in the closing phase of 2023, coupled with multiple favorable news such as ETFs, halving, and interest rate cuts, the much-anticipated bull market in 2024 seems to be on the horizon. In this phase filled with opportunities and risks, hopes and challenges, PANews interviewed 20 well-known crypto institutions, including Animoca Brands, HashKey Capital, Binance Labs, NGC, C Squared Ventures, Cobo, Generative Ventures, and Newman Group, to discuss topics such as future market trends, narrative themes, and potential sectors.

Looking Back at 2023

The frequent black swan events in 2022 plunged the industry into a trough, making "cleanup" and "repair" the two key themes of 2023. Yat Siu, co-founder and executive chairman of Animoca Brands, believes that "2023 is a year of industry consolidation, and we have seen bad actors being eliminated during the market rebound. For many, this is a challenging market environment, but as an industry, we have become stronger and more resilient. Despite the challenges, the entire industry has shown remarkable adaptability and growth, truly showcasing the resilience of this sector."

"From the secondary market perspective, 2023 has been a year of starting low and ending high, where we have seen the clouds parting to reveal the moon." Binance Labs stated that while the primary market has been quieter compared to the previous year, there have still been many encouraging advancements. During the long wait of the bear market, we witnessed a process of elimination, where truly outstanding entrepreneurial teams have settled down to build; at the same time, the reasonable return of valuations has provided long-term investors with more opportunities.

In 2023, Hong Kong has been a hot topic throughout the year. Adrian Lai, founder of Newman Group, pointed out that with the full support of the Invest Hong Kong, Cyberport, and Hong Kong FinTech Week, Hong Kong has become the next Web3 hub. He also expressed surprise at the development of Ordinals, NFTFi, and Web3 social networks.

Eric Yang, managing partner of Fundamental Labs, stated that despite the global economy continuing to face macroeconomic and geopolitical challenges in 2023, the industry has shown good resilience. Technology and applications have further evolved and become more widespread, with new ecosystems continuously emerging. The integration of DePIN, AI, and Web3, along with Bitcoin's second-layer networks, has been particularly impressive.

According to Benson from OKX Ventures, the most surprising sector in 2023 has been the Bitcoin ecosystem. "We have laid out several related projects in line with OKX's focus on wallets. This year, the BTC ecosystem will definitely combine with the Turing-complete smart contract ecosystem in different forms, possibly through restaking/L2 or cross-chain bridge communication protocols, which will give rise to a new round of asset issuance channels and onboard new user groups."

Inscriptions: How Much Potential Does This New Crypto Hotspot Have?

The revival of the Bitcoin ecosystem has sparked a craze for inscriptions, which not only drives innovation in Bitcoin but also spreads the inscription narrative to other public chains, igniting a nationwide frenzy for inscriptions. Will Wang, partner at Generative Ventures, stated, "In any industry, the truly core assets worth holding are always in single digits, and the inscription sector is no different; ultimately, value will concentrate on those with genuine consensus. As early investors, we will actively focus on teams within the BTC ecosystem that address major contradictions, and like ETH, these are still the three: scalability, security, and practicality."

Ciara Sun, founder and managing partner of C Squared Ventures, shared her views on the positive role of the Bitcoin ecosystem, stating that the BTC ecosystem had previously developed slowly, especially regarding BTC scaling concepts. Many BTC developers viewed BTC as a super ledger unsuitable for deploying DApps for DeFi interactions. However, after the promotion of Ordinals, users have become familiar with how to operate within the BTC ecosystem by learning to use BTC wallets and indirectly participating in the BTC ecosystem through inscriptions. This has not only brought significant income to miners but also promoted the development of scaling projects like RGB, Lightning Network, and Tap Assets. Beyond asset issuance, the future BTC ecosystem will need to accommodate more complex application scenarios and usage environments, with less on-chain computation and more on-chain verification continuously driving the ecosystem's iteration.

Adrian Lai from Newman Group believes that Ordinals is currently the fastest-growing sector within the Bitcoin ecosystem. As Bitcoin's market cap rises, the potential for BTC-native DeFi and related markets has rapidly increased, attracting a new batch of users and developers. Consequently, in the first half of 2023, the demand for infrastructure development within this ecosystem surged. However, Adrian noted that the Ordinal ecosystem is still in a very early stage and requires improvements in many technical aspects. In this context, it will take some time for it to experience a new wave of growth. "If this ecosystem can explode before the next bull market arrives, then the prospects for Ordinals are undoubtedly limitless, surpassing Bitcoin's growth rate."

Binance Labs stated that the explosive growth of the Bitcoin ecosystem and inscriptions, along with new ecosystems and BRC20 asset issuance methods, has injected significant enthusiasm into the market, which is still primarily in a speculative phase, with actual utility yet to be observed.

"Inscriptions are still in a chaotic, disordered, and highly fragmented stage with a clear head effect," noted Cecilia, founder of Formless Capital, who also expressed hope to see more related infrastructure emerge in the future to help users and traders better verify, explore, and participate in inscription projects.

Prasad Mahadik, senior investment analyst at MH Ventures, indicated that utilizing inscription technology on Bitcoin's data layer is creating new uses or application scenarios, which could expand its role as a decentralized application layer (DA). The development of the BRC-20 standard now includes functionalities that exceed its initial scope, and the capabilities developed by indexers will not be limited to indexing BRC-20 tokens. The Bitcoin ecosystem is regaining attention, especially in the infrastructure and decentralized finance (DeFi) sectors. "We are also seeing the emergence of various asset issuance standards, such as Runes, TAP, SRC20, and BTC-supported stablecoins. Additionally, the development of scaling solutions like the RGB protocol is enhancing privacy and enabling smart contract functionalities."

"As a novel asset issuance method, as long as there is hot money flowing in, the inscription sector will certainly continue to exist. From the perspective of fair launch, it is also a more user-friendly alternative meme coin." Regarding the potential of inscriptions, Benson from OKX Ventures stated, in the short term, its potential lower limit will also serve as a marketing tool for project teams to do cold starts or new product launches; in the long term, with many excellent developers optimizing protocol layers and launching different asset standard protocols, empowering assets based on these standards or re-running ETH's DeFi practices will certainly bring strong market growth.

Ecosystem Battle: Ethereum or Solana?

Recently, the ecosystem narratives and price performances of Solana and Ethereum have sparked widespread market discussions and "battles" between their supporters. Professional institutional investors view this phenomenon positively.

Yat Siu, co-founder and executive chairman of Animoca Brands, does not believe there is a dispute between Ethereum and Solana; rather, it signifies a fiercely competitive and healthy ecosystem. He stated that when various chains provide competitive alternatives, it drives the market forward. The free market is the cornerstone of innovation and growth, and this competition between Ethereum and Solana is the best proof.

Ciara Sun, founder and managing partner of C Squared Ventures, provided a detailed analysis of the two different ecosystems. She pointed out that the main reasons for Solana's strength relative to Ethereum include: (1) Solana's low price, as the SOL token is at an absolute historical low after the FTX collapse, leading to a large number of users buying in, making it more cost-effective compared to ETH; (2) Active developers: including LSD projects centered around SOL assets continuing to make strides, with TVL steadily growing, driving underlying assets like mSOL to participate in DeFi, improving asset efficiency on SOL, and the rapid deployment of inscriptions like SOLs, LAMP, and FREE, along with the wealth effect driving significant capital inflow, resulting in active developers on Solana attracting market funds and attention quickly; (3) A large number of VCs and the FTX exchange itself holding substantial token stakes, which aligns with everyone's interests.

The reasons for the sluggishness of the ETH ecosystem include: (1) Large market cap and size, making it less cost-effective compared to other L1s; in a bull market, everyone seeks higher returns, requiring more capital to pump ETH, which can easily lead to sell-offs, causing the ETH/BTC exchange rate to continuously decline; (2) Lack of new narratives: After the hype around LSD and Layer 2, there is a lack of core narratives, and the Cancun upgrade has been repeatedly delayed, making it difficult to form reasonable market capital; (3) NFTs in the ETH ecosystem are similar to BRC20 in BTC; the sluggish NFT prices have led to a decrease in real users of ETH, with many users shifting to meme coins and inscriptions in niche sectors; (4) The core market narrative revolves around whether BTC's halving and spot ETF will pass, with fewer external stimuli for ETH, and the foundation has been continuously selling tokens.

The competitive landscape of the crypto market has already played out in the tech sector. Prasad Mahadik from MH Ventures pointed out that this situation has repeatedly occurred in the tech field. "The precedents of Android vs. iOS and Mac vs. Windows tell us that a single architecture is unlikely to support everything. Both ecosystems have much to learn from each other, such as ETH's optimization aspects and Solana's fee mechanisms and MEV mitigation."

Jack, a researcher at Web3.com Ventures, believes that the thriving DePIN ecosystem has triggered a flywheel effect that helps Solana maintain strong momentum in the early stages of this bull market. Although Ethereum's current performance is not impressive, he believes that with the arrival of the Cancun upgrade and the implementation of EIP-4844, a new wave of growth in the L2 market can be anticipated, potentially reshaping the current L2 landscape. The Ethereum ecosystem still holds opportunities for participants in the crypto industry.

Ethereum remains the largest smart contract application platform. Eric Yang, managing partner of Fundamental Labs, believes that competition from other Layer 1s is positive for the entire industry. In addition to Ethereum and Solana, Polkadot will also see a significant 2.0 upgrade with many important features.

With Positive Expectations, What Will the Future Market Look Like?

Under expectations of ETFs, halving, and interest rate cuts, institutions generally hold an optimistic view of market trends in 2024.

Among them, Xiao, a partner at HashKey Capital, is very optimistic about the future market, stating that on a macro level, expectations of interest rate cuts will bring more liquidity. "In the world of BTC, halving is a fundamental positive, and ETFs provide a channel for large funds to enter. At the same time, we see that the BTC ecosystem is starting to have application scenarios, even Layer 2, so I am very optimistic about the BTC ecosystem. On the other hand, during the past year and more of the bear market, the entire crypto industry's infrastructure has also been improving, with certain improvements in scalability and interoperability. With the stimulus of liquidity, we expect to attract more users into the space."

Shen Yu, co-founder and CEO of Cobo, pointed out that in addition to expectations of ETFs, halving, and interest rate cuts, the revision of Basel Committee on Banking Supervision (BCBS) standards and the implementation of cryptocurrency accounting rules by the Financial Accounting Standards Board (FASB) are also favorable for the industry. Shen Yu stated that once the cryptocurrency accounting rules take effect, it means that cryptocurrencies can be treated as a category of assets and calculated based on their real-time value, leading to a phenomenon where more companies will be more willing to hold digital assets, better reflecting their true value. If this trend continues to expand, banks may also hold cryptocurrencies as alternative assets or support collateralized lending, providing better off-market leverage functions instead of the current large amounts of on-market leverage. "Don't try to predict the market; often, the market is unpredictable."

Zihao, a partner at NGC, predicts that after the ETF is finalized, the market will experience a brief uptick, followed by a halving bear market, with the anticipated bull market only appearing in the second half of the year. He added, "From a long-term holding perspective, the halving bear market will present better opportunities."

Nicole, a partner at Lingfeng Capital, believes that ETFs are the biggest boon for Web3, perhaps the only one, and describes this as the government and institutions bowing to the middle class and young people holding votes and crypto, marking a paradigm shift in ideology that will trigger many chain reactions favorable to Web3.

Ken, an investor at Magnus Capital, assesses that we have already seen the market bottom and are approaching a new cycle, possibly entering the next stage of a bull market. "From a macro perspective, once the Federal Reserve adopts better quantitative easing policies, we will certainly see a new round of increases."

Additionally, Jack, a researcher at Web3.com Ventures, maintains an optimistic outlook for the crypto market in 2024, especially in the second half of the year with the arrival of the triple boost from interest rate cuts, halving, and ETFs, the entire crypto market may reach new heights in a bull market.

Compared to these short-term favorable factors, Will Wang, a partner at Generative Ventures, stated that as an early investment institution, being all-in on this sector (compared to other venture capital fields) focuses more on long-term factors. "We are extremely optimistic in the long term, based on a simple assumption: since 2008, the underlying flaws of traditional financial institutions, especially central banks and intermediary financial institutions, and the future debt issues and currency over-issuance and devaluation are unsolvable. Crypto assets will be one of the extremely important options for asset holders. I have previously likened it to a financial version of 'Noah's Ark.'"

The Narrative Themes for 2024: AI, Bitcoin Ecosystem…

"Compliance is the premise, and cross-domain integration is the new opportunity. The acceptance and participation of institutional investors and mainstream industry users will lead the development of Web3 into a new stage," predicted Du Yu, head of Wanxiang Blockchain Lab. He believes that in 2024, global regulations on Web3 will become clearer and more mature. Regulatory frameworks in areas such as ETFs, Stable Coins, and Tokenization will provide guarantees for the healthy and sustainable development of the industry. Du Yu believes that as the industry's narrative shifts from purely blockchain technology to a broader Web3 focus, it marks a transition in the industry's attention from technological innovation to application innovation. From an application perspective, pure blockchain technology is no longer sufficient to meet demands. "It is expected that 2024 will witness a deep integration of blockchain with the Internet of Things and artificial intelligence, especially in the Web3+AI and DePIN sectors, which will bring new focal points and hotspots to the industry."

Yat Siu holds an optimistic view of the market trends in 2024 and is bullish on the development of GameFi. He stated that there are 3.2 billion gamers familiar with the concepts of virtual currencies and assets, and Web3 games are expected to achieve rapid growth, especially in Asia and the Middle East, with Europe also showing strong interest. Some long-anticipated AAA-level Web3 games will be released this year, which are expected to enrich the Web3 gaming experience and promote the overall development of the industry.

Binance Labs anticipates that 2024 will see upward movement amid challenges, judging that the main narratives will revolve around two areas:

• Breakthrough applications targeting large user bases: such as social finance, game finance, and AI-driven applications. The biggest challenge is that most current application products are still primarily financial in nature, with insufficient user usage and consumption scenarios, lacking business models and sustainable income outside of financial scenarios.

• Innovative DeFi projects: such as LSDFi and new types of derivatives exchanges. DeFi, as the most essential application in the industry, is also continuously undergoing iterations and innovations: from spot to derivatives, from AMM/order books to various hybrid mechanisms, from trading mining to real yield supported by actual cash flow.

Additionally, they believe that the biggest challenge this year is that the speed of technological iteration may lag behind the industry's transition to a bull market, with infrastructure development not keeping pace with the influx of users and capital into the industry.

In Will Wang's view, narratives can be divided into internal and external. "The internal narrative will be constantly changing in 2024; at the beginning of the year, it may be the BTC ecosystem, but by mid-year it may not be, and by the end of the year, it could change back again, with the frequency of change possibly occurring monthly. This reflects the phenomenon of internal capital being unsettled; however, for the external perspective, or how the public views crypto assets, our stance remains consistent: it must be based on trust reconstruction! This means whether these assets are reliable and predictable, rather than being marred by various scandals and security incidents every few months. Therefore, we believe that the narrative truly belonging to the public is the trust reconstruction of these assets, whether through mainstream financial institutions entering via ETFs or through technological advancements that iteratively enhance the boundaries of the industry's impossible triangle, all of which are the real driving forces.

Will Wang also added, "Moreover, we are more focused on the next 'Satoshi moment.' In 2008, Satoshi attempted to address the trust issues brought about by central banks and financial intermediaries. What about in 2028, 20 years later? If this breakthrough in AGI occurs as expected, then the intermediary issue in 2028 will be AI, and how to balance and hedge the intermediary problems brought by AI will be humanity's greatest proposition, and it will also be the next 'Satoshi moment.'"

Xiao, partner at HashKey Capital, stated that this year's narrative theme is about breaking out and integration. "First, the financial integration brought by ETFs allows more funds to enter the crypto space more easily. On the other hand, due to improvements in infrastructure, it can support more large-scale user applications, and we will also see the integration of the crypto user base with traditional user bases. Additionally, crypto is also integrating with other technologies like AI and IoT."

Zihao, partner at NGC Ventures, mentioned that there are many main narrative threads in this market, which can be categorized into different levels corresponding to different asset scales and risk levels, as well as potential returns. He stated that breaking out remains a common challenge faced by all narratives, with Bitcoin, AI, Solana, DePIN, and Gaming having the best foundations for breakout. Eric Yang, managing partner of Fundamental Labs, expressed particular interest in the integration of DePIN, AI, and Web3, as well as the infrastructure of the Bitcoin ecosystem. Ken, an investor at Magnus Capital, also agrees that the industry will focus on the combination of DePIN, AI, and Web3, pointing out that the lack of large-scale and high-security interoperability remains a challenge, and zk technology is expected to mature further to meet this demand.

Karen Kao, marketing director at Sora Ventures, believes that the main narrative will revolve around the Bitcoin ecosystem, such as inscriptions and BRC20, as well as other protocols like atomicals and TAP/PIPE, and Casey's runes. Currently, the main obstacle is that the market is primarily focused on Bitcoin memes, so as more practicality enters the market, people will gradually gain a better experience in interacting with L1 Bitcoin, which will enhance speculative behavior and further drive up prices.

Miki Isakari, investment manager at MZ Web3 Fund, believes that the narrative theme for 2024 will revolve around decentralized finance (DeFi) and cross-chain interoperability. As more institutions and individuals participate in the crypto market, they will require more efficient and secure financial services, which DeFi provides. At the same time, cross-chain interoperability is becoming increasingly important, as different blockchain networks need to collaborate to meet broader application demands. Regarding the many long-term challenges facing the industry, Miki Isakari identifies three main aspects. First, regulatory uncertainty is a significant issue, as governments and regulatory agencies are strengthening oversight, which may negatively impact the market. Second, technological risks cannot be ignored, as blockchain technology is still in its developmental stage, with many potential issues and risks remaining. Finally, there are concerns about market manipulation and fraud. These issues damage the market's reputation and trust and need to be addressed.

When to Enter? How Ordinary Investors Can Seize the Bull Market

For many retail investors who are attentive to the dynamics of the crypto industry, how to seize the right moment to enter the market and find the best buying and selling points to maximize profits in a bull market is the most important and concerning issue. Shen Yu, co-founder and CEO of Cobo, stated that everyone's financial situation and risk tolerance are different, and given the high volatility of the cryptocurrency market, it is essential to enter the market to experience and feel it. As for when is the best time to enter, it also varies from person to person. Additionally, combining some key year-end routine tasks he shared on X, he provided detailed advice for ordinary investors:

First, it is crucial to ensure asset security management:

• 1. Follow the 3-2-1 data backup principle: Don't wait until data is lost to regret it. Regular backups ensure safety.
• 2. Security risk modeling: Identify and respond to potential risks based on the “Blockchain Dark Forest Self-Rescue Handbook” to safeguard data and system security.
• 3. Password and system updates: Update strong passwords, back up 2FA, check SIM card PIN codes, reset operating systems, and avoid security vulnerabilities.
• 4. Network security checks: Inspect network devices to ensure a robust network environment that protects online activities.
• 5. Wallet backup verification: Confirm that wallet mnemonic backups are correct to prevent unnecessary losses.
• 6. Scan old address assets and authorizations: Conduct a comprehensive check of previously used addresses to ensure asset safety, clean up authorizations while gas fees are low, and update the whitelist address list.

Secondly, it is essential to prepare a financial plan:

• 1. Update the balance sheet: A clear financial status is the foundation for rational decision-making.
• 2. Annual asset management plan: Set clear goals for the bull market in 2024.

Finally, continue learning, maintain curiosity, and observe and think critically. The crypto industry evolves rapidly, has strong cyclicality, and bubbles burst quickly. There are numerous innovations and various interesting developments, so continuous learning and growth are necessary to capture opportunities for rapid growth effectively.

Jack, a researcher at Web3.com Ventures, stated that for non-professional investors, holding mainstream tokens will be a more stable revenue strategy for participating in the bull market, avoiding the influence of overheated investment sentiment on judgment. The noise of market information in a bull market is often greater, placing higher demands on investors' research capabilities.

Yi Hsin Wei, BD Associate at Ava Labs, noted that it may be a bit late to enter now, as the best entry time was during the low periods of Q1-Q3 in 2023. However, the best strategy now is to invest regularly (DCA) and shift to altcoins with higher upside potential. Additionally, gradually accumulate larger market cap tokens and seek the best yield avenues, such as staking and LSDs.

Eric Yang, managing partner of Fundamental Labs, believes that Web3 is still a very new industry, with good investment opportunities and targets regardless of bull or bear markets. Avoid following the crowd, do not blindly follow trends, and do not FOMO; continuous learning, maintaining independent judgment, and staying rational will always present good entry opportunities.