Are the traditional venture capital firms that are rushing into the market going to take over the entire crypto industry?

On March 22, Coindesk reported, citing sources, that Bridgewater Associates, with a total asset management scale of US$150 billion, plans to support an external crypto investment fund , thus starting to get involved in the crypto field. Previously, its president Ray Dalio publicly stated that he holds Bitcoin.

On March 23, The Block reported that Haun Ventures, a venture capital firm led by former a16z partner Katie Haun, has also raised $1.5 billion for its two venture capital funds focused on crypto assets, including $500 million for early-stage investments and $1 billion for "accelerator" funds.

Sequoia Capital: All in Crypto

A strong storm starts with a small ripple. In recent times, especially since the beginning of 2022, the venture capital giants that have shined in the traditional Internet era have begun to appear more and more frequently in investment and financing events in the crypto world, and even directly established relevant investment funds in the crypto field (some directly invest in crypto assets), and began to make large-scale layouts.

The most obvious move is undoubtedly Sequoia Capital, which has been sending high-profile All in Crypto and Web3 signals since last year:

On December 8, 2021, Sequoia Capital changed its Twitter profile to " Mainnet faucet. We help the daring buidl legendary DAOs from idea to token airdrops. LFG " - although it has now been changed back.

On February 18 this year, Sequoia Capital directly launched a crypto asset investment fund with a scale of US$500 million to US$600 million. This is also the first specific industry fund of Sequoia Capital since its establishment in 1972.

In addition to the crypto asset sub-fund, Sequoia Capital will continue to invest in crypto asset startups through its main seed fund, venture fund, growth fund and expansion fund, which have total capital commitments of more than US$7.5 billion.

Sequoia Capital mainly invests in liquidity tokens, including tokens listed and unlisted on crypto asset trading platforms. The investment scale of a single project ranges from US$100,000 to US$50 million , and it plans to participate in processes from staking to providing liquidity to governance.

Since 2014, Sequoia Capital has been investing in the crypto space in both equity and token transactions. Last year, 20% of its new investments in the United States and Europe were in crypto projects . Its portfolio includes Filecoin, FTX, Fireblocks, StarkWare, BitClout, Iron Fish, Parallel Finance, and more.

Additionally, Sequoia Capital is particularly interested in cross-chain interoperability and the GameFi project, and believes that multi-chain is the future , and Sequoia is monitoring developer activity across networks including Terra, Avalanche, NEAR, Polkadot, and Cosmos.

Venture capital funds rushing into the market

In fact, before 2021, Grayscale was the only company in the entire crypto industry that acted as an intermediary channel for qualified investors and institutions to intervene in the Crypto market , achieving a weak connection between investors and crypto assets and opening up a channel for incremental off-market funds to enter the market directly.

Now, with the successive launch of crypto-related ETFs, and the rapid change in the market's perception and attitude towards crypto assets under continuous innovation (DeFi, Web3) and growth in scale, the "institutional" attributes of the entire crypto industry are being significantly increased.

One of the most direct manifestations is undoubtedly the formation of large venture capital funds focusing on crypto assets with a capital scale of hundreds of millions of dollars.

In February this year, Ark Invest applied to launch the venture fund ARK Venture, which will invest in companies involved in disruptive innovations , including companies that develop, use or rely on blockchain technology. It may also indirectly invest in crypto assets such as Bitcoin by investing in the Grayscale Bitcoin Trust (GBTC).

Then in March, the speed at which traditional institutions and capital entered the market began to dazzle people:

• On March 7, large trading company DRW Holdings began to provide over-the-counter bilateral options trading services for crypto assets. Its target users are Bitcoin miners and crypto asset investors who need to hedge risks or generate returns. The product allows traders to customize the expiration date, strike price and underlying token of each transaction;

• On March 8, Bain Capital Ventures, an investment company of Bain Capital, a US private equity investment company, launched a $560 million crypto fund, which will invest in about 30 companies in the next few years and has invested about $100 million so far.

• On March 10, the CEO of Z Holdings, a subsidiary of SoftBank Group, revealed that Z Holdings plans to launch an NFT market in 180 countries around the world this spring, and will invest heavily to double the number of users of its payment app PayPay to 90 million;

• On March 11, venture capital firm Bessemer Venture Partners has pledged to invest $250 million from existing funds to invest in Web3 projects in three core areas: consumer decentralized finance (DeFi), infrastructure and other "enabling technologies";

• On March 16, Japanese social giant LINE cooperated with 26 companies including Visa and Crypto.com in the fields of games, comics, entertainment, metaverse, art, etc., planning to establish a global NFT value chain;

• On March 21, Goldman Sachs announced its first over-the-counter crypto asset transaction with Galaxy Digital. The transaction was conducted through non-deliverable foreign exchange options on Bitcoin, representing the first step for the bank to provide its clients with direct and customizable crypto asset exposure.

Most venture capital firms began investing in the crypto space in the middle of last year, focusing on CeFi and infrastructure projects, and often appearing as lead investors.

The crypto world and the traditional financial world seem to be gradually becoming deeply intertwined through each other's VC investments.

What are the favorites of traditional venture capital?

The continuous entry of institutional investors into the crypto asset market, or the "institutionalization" of the crypto asset market will be an unstoppable trend.

So for these traditional venture capitalists, which crypto investment themes are most likely to attract their attention when making money in the crypto world?

From the perspective of specific projects, the investment types of traditional institutions cover almost all mainstream tracks, including Layer1, Layer2, NFT, CeFi, DeFi, Privacy, Web3, SocialFi, etc. , and almost everyone has their own preferences:

• Goldman Sachs seems to be fond of the encrypted data track. Among its few Crypto layouts, it has successively invested in blockchain infrastructure service provider Blockdaemon and encrypted data company Coin Metrics.

• SoftBank likes leading or star projects in various fields , such as trading platform FTX, Grayscale parent company DCG, sandbox game The Sandbox, public chain Polygon, etc.

• Lightspeed Venture Partners prefers underlying infrastructure , such as Terra developer Terraform Labs, crypto asset market maker Wintermute, Web3 development platform Alchemy, Web3 infrastructure developer Mysten Labs, Layer2 solution Arbitrum, etc.

In addition, NFT is the most favored by the majority of institutions. Just a few days ago, Yuga Labs, the issuer of Bored Ape Yacht Club, completed a new round of financing of US$450 million with a valuation of US$4 billion . This is also the largest financing in the NFT industry to date. This round of financing was led by a16z. In addition to the common venture capitals in the encryption industry, the participating investors also include "traditional forces" such as Samsung, Google Ventures, and Tiger Global.

summary

In general, the compliance of the crypto trading system has laid the foundation for the entry of institutional investors . Therefore, to some extent, the traditional institutions and capital that are now rushing into the market with large amounts of money show from the side that the crypto market is accelerating compliance and moving towards the mainstream (even if it is recognized in the form of "alternative assets").

" Crypto assets will become the biggest trend in the next 20-30 years ." Faced with the increasing confidence and rush into the market of traditional institutions and capital, the crypto world is ushering in its own critical moment.