During a recent episode of a podcast organized by Wormhole & Pyth in Hong Kong Activity Week, some of the most influential venture capitalists in the Chinese cryptocurrency landscape discussed several contentious topics.
These included the valuation of projects in bull markets, the comparison between primary and secondary market investments, the potential overhype surrounding AI and Bitcoin Layer 2 technologies, and the concerns around the monopolistic tendencies of major exchanges like Binance. The dialogue offered a deep dive into the strategic thinking that drives VC investments in the rapidly evolving digital asset space.
A key concern raised was the surge in project valuations during bull markets, making investments riskier and potentially less rewarding. Michael from Inception Capital noted the short windows in bullish periods that demand quick exits and high turnover, contrasting sharply with bear markets where slower, more considered investments can be made. This sentiment was echoed by BMAN from ABCDE, who highlighted the strategy of preparing for long-term holdings or capitalizing on short-term market cycles as critical to navigating these fluctuating valuations.
Primary vs. Secondary Markets: Where to Invest?
The debate between the merits of investing in primary versus secondary markets was another focal point. While primary investments involve direct funding to new projects, secondary investments deal with buying and selling existing shares. Michael pointed out a shift toward the secondary markets driven by a pursuit of liquidity. However, BMAN advocated for the primary market’s potential for empowerment and long-term value creation, contrasting it with the zero-sum nature of secondary markets.
The discussion also covered the role of AI and Bitcoin’s Layer 2 solutions in investment strategies. While some VCs like Michael see AI as a substantial and ongoing narrative that transcends trendiness, others expressed caution. The panel was divided on Bitcoin Layer 2, with some skepticism about its current hype but a general consensus on the need for technological advancements over mere capital accumulation metrics like Total Value Locked (TVL).
Binance’s Market Influence: A Monopoly Concern?
Lastly, the influence of Binance, a leading cryptocurrency exchange, was scrutinized. Michael and BMAN discussed the potential issues arising from a centralized entity wielding significant power in a fundamentally decentralized ecosystem. They noted that while Binance’s role as a major liquidity provider is undisputed, the rise of decentralized exchanges (DEXs) and other platforms indicates a shift towards more distributed forms of trading and liquidity.
Overall, the podcast shed light on the sophisticated strategies that guide VC investments in cryptocurrency, reflecting both the opportunities and challenges posed by this dynamic market. As the industry continues to mature, the insights from these top VCs in Hong Kong are likely to influence broader market trajectories and investment approaches globally.
