What should I buy when the market crashes? Encryption VC is betting on these types of projects

Original text: Steven Ehrlich , Unchained

Compiled by: Yuliya, PANews

The global financial market has experienced severe fluctuations recently, and the cryptocurrency field has also not been spared. However, as the investment community often says, market reversals often create rare buying opportunities for visionary investors. Under such turbulent environments, it is particularly important to understand the layout strategies of professional investors.

Cryptocurrencies continue to decline with the overall market as President Trump announced large-scale and indiscriminate global sanctions last Wednesday. As of writing, Bitcoin has fallen 5.86% since then, amid a rebound after the first drop below $75,000 (the first since the November 5 election). Other large-cap cryptocurrencies such as ETH, Solana and XRP have also performed poorly during this period, and have all underperformed the market leaders.

In such a market environment, market panic has increased significantly. The Cboe VIX index, which measures expected stock market volatility, hit 60 for the first time since the outbreak of the coronavirus, while the Deribit Bitcoin Volatility Index (DVOL), the closest alternative to the cryptocurrency market, has risen nearly 30% in the past week.

In this case, it is a natural reaction for investors to seek hedge – or to buy U.S. Treasury bonds. However, there is a common saying in the investment world: "Others are greedy when they are afraid, and others are greedy when they are greedy." This means that now is the opportunity to buy blue chip assets at a discounted price. To understand how professional funding is laid out in cryptocurrency markets during this volatile time, the two major venture capitalists who asked to be anonymous shared strategic insights from their respective companies and provided key information on which categories and industries may perform best in the coming weeks and months.

Store of value: Bitcoin and Ethereum

Although not surprising, both respondents believe that Bitcoin is still the first choice. Gold has set new highs recently and is widely regarded as a symbol of safe-haven assets. At the same time, Bitcoin is increasingly showing its attributes as a "digital store of value". Despite recent trends, judging from the market value comparison chart, there is still a lot of room for growth between Bitcoin and gold.

The current market value of gold is about $20.4 trillion, while Bitcoin is only $1.64 trillion. An investor pointed out: " To compare gold's market value of 1:1, Bitcoin will rise at least 12 to 15 times. In the current environment, this is the easiest to understand and most certain opportunity."

Ethereum is also considered an asset worthy of attention, although it has lagged far behind Bitcoin in price performance in recent years and is currently at its lowest point since the early stages of the epidemic.

One interviewee mentioned that after Ethereum switched from Proof of Work (PoW) to Proof of Stake (PoS) in 2022, its monetary policy has tended to deflate, allowing it to a certain extent to undertake Bitcoin's "store of value" narrative. Despite the recent poor network usage and rebound in inflation, from a valuation perspective, the current price is at a historical low.

Another investor said: " Ethereum is so low now, it is indeed a good time to buy."

Solana and DeFi Opportunities

Decentralized finance (DeFi) tokens have generally suffered heavy losses this year, with native tokens for exchanges and lending protocols such as Uniswap, Aave, Curve and Compound falling by nearly 50% year-on-year. However, both investors believe that this field is expected to rebound strongly against the backdrop of the current macro environment.

One of them pointed out that during a period when stablecoin returns are low, DeFi may usher in a return to funds . Because in the on-chain lending combination revolving operation, there is still a way to obtain relatively high rates of return. “It’s very similar to what’s going on in 2021,” he added.

Two projects worth focusing on are Raydium and Hyperliquid. The former is a traditional automated market maker built on Solana, similar to Uniswap; the latter focuses on perpetual contracts and is a cash settlement derivative.

If you are unwilling to choose a single token, you can also pay attention to Solana itself. “Solana is somewhat like an index fund for DeFi. There are a lot of really interesting DeFi projects on it that are developing.”

EigenLayer and Near: Next round of infrastructure opportunities

Both investors believe that the hot concept of "AI+ blockchain" last year is mostly exaggerated . One said bluntly, "It's basically all air projects." But he also pointed out that this situation is not uncommon in early tracks, as is the case with the 2017 ICO wave. "The first wave is usually air projects, but there will be a little real thing in it, and these are what are the things to pay attention to in the next few years."

They believe that the next stage of AI narrative is more likely to fall on " AI agents" , such as travel robots that automatically book tickets. The question is, how do you ensure that funds deposited into such agents are not stolen? One of the methods is to make its security guaranteed by Ethereum's own security.

However, Ethereum is not suitable for all projects, mainly due to the high transaction costs and some applications need to run across chains . It was born in this context that EigenLayer provides an “shared trust layer” for applications that allow projects to leverage Ethereum’s security without having to be fully deployed on their mainnet.

"Once your app runs on EigenLayer, its funding security is guaranteed by Ethereum," said an investor. He also specifically mentioned that Near may also benefit from this trend.

EigenLayer was once one of the most anticipated projects on the market, but its token was launched last October and when the bull market was approaching its peak, the price plummeted by more than 80%. But if the current narrative holds true, it means that investors can buy at a significant discount. One investor added: "EigenLayer's market value is less than $1 billion now, and this is the opportunity to buy and hold."

Overall, although the crypto market is still digesting macro and policy uncertainties in the short term, for institutional investors, it is currently a critical opportunity to reconfigure assets and lay out a new upward cycle. From store of value assets, to infrastructure and DeFi platforms, to emerging AI interactive applications, the direction of betting on funds has gradually emerged.