The Crypto Market from the First-Level Perspective of Eastern and Western VCs: Narrating for the Sake of Narration, Utterly Boring
For the feeling of the market, the word "boring" may be the most fitting adjective.Original Title: “Market from the Perspective of Eastern and Western Primary Markets and Some Thoughts”
Original Author: Lao Bai, Partner of ABCDE Investment Research
It seems that this is the longest period of inactivity on Twi. The reason is simple: as a blogger who never takes ads, I need a desire to express myself to drive my writing, and the market in recent months has made it hard to feel that way. The dismal performance of the secondary market certainly plays a significant role, but the feeling from the primary market might be the main reason for this lack of desire to express.
However, I have recently observed some phenomena and have some thoughts, which may be relatively long, so I plan to split them into three or four posts, focusing on “The Market from the Perspective of Eastern and Western VC,” “New Signs of RWA,” and “Some Noteworthy Aspects of ETH and Solana.”
Let’s discuss the first topic today
In the past few weeks, I have talked with several peers in Asia and found that everyone has coincidentally entered a “pause” or “conservative” investment mode.
Our most recent investment was in January, and several peers have similar experiences, with many cases of not making a move for two or three months or even longer.
As for the market feeling, the word “boring” might be the most fitting adjective, or perhaps a temporary “consensus.”
This sense of boredom is not entirely linked to the secondary market. I clearly remember that after the Luna crash, although the secondary market was sluggish, discussions about promising expansion projects in the primary market, such as ZK or innovative DeFi, GameFi, and AI, still excited everyone. However, this sense of excitement has gradually faded as we approach 2025.
The secondary market's disinterest in any narrative lasts only a few days, which naturally affects the primary market's emotional transmission. But a more concerning worry is—have we entered a phase where the “low-hanging fruit” has mostly been picked, leading us into a long period of adjustment, exploration, and transformation, accompanied by a corresponding painful transition? I will elaborate on this topic at the end because the current state of Western VCs differs somewhat from that of the East.
The trigger for this reflection is a DeFi project we invested in during the pre-seed round last year, which is now raising a seed round. I originally thought that given the current primary and secondary markets, it would be satisfying to just fill the round. To my surprise, they over-raised by several million dollars, with several European and American VCs eager to invest. This result astonished me; the project itself is certainly good, but it’s not of S-level quality.
Why is it that while we in Asia are “silent,” European and American VCs are still “firing”? What gives them the courage to pull the trigger at this valuation?
We had some internal discussions and made some irresponsible guesses, such as:
The establishment timeline of European and American VCs differs from that of Asian VCs, leading to different exit cycles and investment decisions.
Asian VCs tend to have a “small-town test-taker” mentality, focusing on either outperforming peers or at least beating BTC (though I believe few can achieve that in the current market). In contrast, European and American counterparts are more infused with idealism and long-termism; as long as they can logically explain to LPs why they invested in a project at this valuation, their obsession with returns becomes secondary.
A pure need to deploy funds; once they finish this round, they want to quickly raise the next one, primarily to collect management fees.
The specific reasons are unclear, and for now, we can only guess. Therefore, in the coming weeks, I have scheduled chats with several partners and researchers from European and American VCs to exchange views on the market and directly ask about the above question. Once I gather the information, I will update on Twi.
Now, turning back to the topic of low-hanging fruit, I also want to take this opportunity to discuss where the future of Crypto lies.
First of all, whether personally or as ABCDE, our long-term bullish belief in Crypto has never wavered; this can even be considered a “faith,” otherwise, I wouldn’t be fully engaged in this profession.
However, in the short to medium term, we are indeed at a crossroads, one that I am unsure is similar to the crossroads before the emergence of DeFi Summer in 2019. Therefore, I want to share this with everyone.
The trigger for this reflection was listening to the AlliaceDAO podcast recently, where three points resonated with me.
Qiao mentioned that his current feeling is similar to that of 2019, not knowing what the next step for Crypto will be until the emergence of DeFi Summer in 2020 opened his eyes and gave him direction.
They believe that Crypto has only found one PMF over the years, which is finance, and to be more specific, trading (Dex, Cex, Perp), lending, stablecoins, and minting (asset issuance, e.g., Pumpfun).
They provided a lot of advice for their AI x Crypto startups, suggesting that if the Crypto elements in the project are too forced, it might be better to remove Crypto altogether and focus purely on AI. As a result, 30% of the projects indeed removed Crypto and became pure Web2 projects.
Regarding point 1—although I entered the space in 2019, I was merely trading coins. To be honest, I’m not sure if VCs back then felt the same “boredom” as now, but I remember that at least IEOs were thriving, EOS was exploring directions, and Starkware proposed the ZK concept. Many projects from the DeFi Summer of 2020 should have been established and funded in 2018-2019, so theoretically, the experience in the primary market should have been better than now. In other words, the belief that “something big is coming” was likely stronger back then than it is now.
Regarding point 2—this echoes point 1 and is my biggest concern in the short to medium term: have we reached a crossroads where the low-hanging fruit has mostly been picked, which is different from 2019?
If the biggest PMF for Crypto in terms of utility is finance, then the DeFi Summer and the subsequent years of continuous micro-innovation have essentially reached a boundary today.
On the flip side of utility, which Crypto excels at, is the narrative direction. Meme is undoubtedly the best representative, and Pump.FUN has also pushed this direction to a boundary in 2024.
Moreover, in the past few years, when both utility and narrative were uncertain, our circle at least could still focus on infrastructure. From ETH to EOS to Solana, and then to Aptos, Sui… I wonder if with Solana’s Firedancer, Monad, and MegaETH likely launching on the mainnet this year, we have also reached a boundary in blockchain infrastructure expansion?
Regarding point 3—at a crossroads where all three paths have reached their boundaries, is there only one path left, namely “the modularization of blockchain,” which relates to the third point mentioned above? I have also heard similar insights in YC’s podcast.
The modularization referred to here is not the kind of modularization seen in Celestia, but rather abstracting blockchain technology as a whole into a module that can be inserted as a function into a startup, similar to AI.
Most of the Crypto projects we see today are entirely based on Crypto or are Crypto for the sake of Crypto, rather than solving a real-world problem. It sounds nice to call them Crypto Native, but the harsh truth is that they don’t reach beyond their circle and are just self-indulgent.
The Web2 AI investment circle is likely facing similar issues, with many projects appearing to be “AI for the sake of AI,” rather than solving a specific real-world problem.
Will the future primary market produce some form of fusion or encounter between Web2 and Web3? A project must exist to solve a real-world problem; in the process of solving that problem, if Crypto elements are needed, they should be included, and if AI elements are needed, they should be included as well, but the original intention and purpose should not be entirely related to Crypto or AI. Just as Meituan Waimai utilizes 5G, platform software, big data, and AI task allocation… but fundamentally, it is a project born to solve the problem of food delivery.
If the next major phase of Crypto takes this form, will people find it boring? Can the current forms of Crypto VC, trading platforms, studios, and other elements based on the Crypto Native industry chain continue?
Currently, an increasing number of projects related to Payment and RWA in the primary market somewhat align with this third idea. Recently, I researched Ondo’s Global Market and discussed several RWA projects; I will specifically talk about the new directions in the RWA track in the next post.
