TLDR:
Key Points:
- Venture capitalists are slowing down crypto investments for a nuanced reason
- Funding has slowed as VCs focus on “breakout trends” over “moonshots”
In a recent thread, venture capitalist Adam Cochran noted that VC firms are decreasing their investments in the crypto industry due to a nuanced reason. Cochran explained that most venture capital firms have limited partners who are primarily interested in outperforming index fund returns in the medium term. As Bitcoin and Ethereum provide significant returns, VC investors are opting to stay on the sidelines with these assets rather than taking risks with early-stage startups in the Web3 space.
During the last crypto cycle, VC firms were seen investing in applications that had already broken out, hoping to capitalize on late-stage returns. However, with previous trends like NFTs, AMM forks, DeFi, and L2s reaching saturation, the next big trend is unclear, leading VC firms to be more cautious in their investments.
While crypto venture capital funding exceeded $1 billion in three separate months in 2024, the overall trend has slowed compared to previous years. Venture capitalists in the crypto space are being more selective in their investments, focusing on proven trends rather than taking early-stage risks.
