Crypto market from the perspective of East and West VC: narrative for narrative, boring

Author: Lao Bai , Partner of ABCDE Investment Research

Speaking of which, it seems that this is the longest time that Twi has been interrupted. The reason is nothing else. As a blogger who never follows the crowd, every time I write something, I essentially need to express my desire to drive it. In the past few months, it is difficult for people to have such a feeling. Although the decadent performance of the secondary market accounts for a large proportion, the feeling given by the primary market may be the main reason for this lack of desire to express.

However, I have observed some phenomena recently and have some thoughts, which may be relatively long, so I plan to break them into three or four articles to publish them. The main ones are "the market from the perspective of the East and West VC level", "New signs of RWA", "Some things worth talking about on ETH and Solana"

Let's talk about the first topic today

In the past few weeks, I have talked with several Asian counterparts and found that everyone has entered a "pause" or "conservative" investment model.

Our most recent move was in January, and several colleagues were similar. There are many cases where we don’t take action every two or three months or even longer.

As for the market feeling, the word "boring" may be the most appropriate adjective, or temporary "consensus"

This sense of boredom is not completely linked to Level 2. I clearly remember that after the Luna collapse, although the secondary market was sluggish, everyone was still excited about the good expansion projects that were discussed in the primary market, such as ZK, or innovative Defi, Gamfi, and AI. And after entering 2025, I gradually cannot experience this excitement. The secondary market is decadent for any narrative for only a few days, which naturally has an emotional transmission effect on the primary, but one of the more worrying things about Concern is - have we entered the stage of roughly picking the "low-hung fruits", and since then we have entered a long period of adjustment, exploration, transformation, and a window period accompanied by corresponding severe pain? Regarding this topic, I will talk about it at the end, because the current state of Western VCs is somewhat different from that of Eastern.

The cause was a Defi project we invested in the Pre-seed round last year, and was recently in the Finished Seed round. Originally, I thought about it, in the current primary and secondary markets, I would be very content to be able to fully integrate. Unexpectedly, after oversubsidized millions of dollars, several European and American VCs rushed to stuff money into it. This result surprised me. Although the project itself is good, it is not as good as the S-level texture. Why is Europe and the United States still "fireless" while our Asia is "still"? What is the reason why they dare to value Pull the Trigger at this valuation?

We discussed internally and made some irresponsible guesses, such as

1. The time when European and American VCs were established was different from that in our Asia, so the exit cycle was different, and the investment decisions were also different.

2. Asian VCs have the temperament of "small town testers". In terms of yield, they either think of winning over their peers in the paper or at least outperforming BTC (but I believe few companies can do this at the moment - -), European and American peers have a stronger atmosphere in idealism and long-termism, or in other words, as long as they can explain to LP logically why I invested in this project under this valuation, their persistence in yield is actually secondary.

3. Pure Deploy Fund needs. After investing in this period, you should raise funds quickly for the next period, mainly for management fees.

The specific reason is unknown, so I can only guess at the moment, so in the next few weeks I have invited a group of partners and researchers from European and American VCs to chat. In addition to sharing my views on the market, I also want to ask the above questions directly in person. After collecting the information, I will come to Update on Twi

Then I turned around and talked about the hanging fruits. I also wanted to take this opportunity to discuss with you where the future Crypto is.

First of all, whether I personally or ABCDE, my long-term belief in Crypto Bullish has never been shaken. This can even be regarded as a kind of "faith", otherwise I would not have been engaged in this profession full-time. But in the medium and short term, we are indeed at a crossroads, a crossroads that I am not sure whether they are similar to those before the Defi Summer appeared in 2019, so let's talk to you.

The cause is also that I have been listening to AlliaceDAO's Podcast recently. The three views mentioned in it have resonated a lot with me.

1. Qiao said that his current feeling is similar to that in 2019. I don’t know what will happen in Crypto next. Until the appearance of Defi Summer in 2020, he lit up his eyes and found the direction.

2. They believe that Crypto only found one PMF for so many years, that is finance. To be more specific, it is trading (Dex, Cex, Perp), lending, stablecoins, and Mint (asset issuance, eg Pumpfun)

3. They gave them a lot of AI x Crypto Start Up suggestions. If the Crypto elements in the project are too far-fetched, it is better to remove Crypto directly and do pure AI directly. As a result, 30% of the projects really remove Crypto and become pure Web2 projects.

About 1 - Although I have entered the circle in 2019, I was just simply speculating on cryptocurrencies. To be honest, I am not sure if the VC at that time had the "boring" feeling now. But in my impression, at least IEO is popular, EOS is exploring directions, Starkware proposed the ZK concept. Many projects of Defi Summer in 2020 should have been established and invested in 2018-19. In theory, the feeling of the primary market should be better than now. In other words, at that time, everyone's belief in the "big thing is coming" should be higher than now?

About 2 - is an echo of 1, and it is also my largest Concern in the short and medium term, that is, whether we have reached a crossroads where the low-hanging fruit is roughly picked, which is different from 19 years.

If Crypto's largest PMF in Utility is finance, then Defi Summer+'s micro-innovation that continues to iterate over the next few years has basically reached a boundary today

The opposite of Utility is also what Crypto is good at - that is, the narrative direction, Meme is undoubtedly the best representative, and Pump.FUN pushed this direction to a boundary in 2024.

Then there is the past few years when Utility and narrative are not sure what to do, our circle can at least turn Infra into it. From ETH to EOS to Solana, and then to Aptos, Sui... I was thinking that Solana has Firedancer this year, Monad and MegaETH will most likely be online. Have we reached the boundaries in the expansion of blockchain Infra?

About 3 - At a crossroads, all three roads have reached the boundary, so whether there is only one last road left, namely "modularization of blockchain", which is the third point above, I also heard a similar Insight in YC's Podcast

The modularity mentioned here is not the modularity of Celestia, but abstracting the blockchain technology as a whole into a module and inserting it into a Start-Up as a function, which is similar to AI.

Most of the Crypto projects we see now are built entirely on Crypto, or Crypto is not about solving a problem in the real world. It sounds nice to call Crypto Native, but it sounds bad, it doesn't leave the circle at all, and it's fun inside.

There are probably similar problems in the Web2 AI venture capital circle. Many projects seem to be "AI for AI" rather than solving a specific and realistic problem.

Will the primary market have some kind of integration or encounter between Web2 and Web3 in the future? A project must exist to solve a problem in the real world. In the process of solving the problem, the part that needs to be used for Crypto is added to the Crypto element, and the element of AI is added to the AI, but the original intention and purpose are completely irrelevant to Crypto and AI. Just as Meituan Takeout uses 5G, platform software, big data, and AI task allocation... but it is essentially a project that solves the problem of eating.

If Crypto's next big stage is in this form, will you feel bored? Can a series of current forms based on the Crypto Native industrial chain such as Crypto VC, exchanges, studios, etc. continue?

At present, more and more Payment-related projects related to RWA in the primary market are in line with the idea of ​​3. I happened to study Ondo's Global Market recently and talked about several RWA projects. The next article will specifically talk about the new direction of the RWA track.