Venture capital turns to Bitcoin and Ethereum

In the cryptocurrency industry, venture capital firms (VCs) are gradually turning their attention to more mature assets such as Bitcoin and Ethereum, reducing investment in high-risk early-stage projects. Adam Cochran, a partner at Cinneamhain Ventures, discussed this trend in depth on August 9, explaining why many VCs are slowing down investments in emerging crypto projects.

Cochran pointed out that the return to risk ratio of Bitcoin and Ethereum is more attractive than traditional investments. This allows VCs to avoid the high risks associated with investing in emerging Web3 startups. He mentioned that many investors (limited partners, LPs) in venture capital firms are primarily concerned with returns beyond traditional investments such as index funds.

Cochran explained: “VC investment in cryptocurrencies has significantly slowed down, and the reason for this is quite subtle. Many venture capital firm limited partners prefer stable and better-than-index fund returns.”

Source: X Adam Cochran said that VCs are gradually turning their attention to more mature assets such as Bitcoin and Ethereum.

According to data from Curve.eu, Bitcoin has returned an average of 60% annually over the past decade, while the S&P 500, a major stock market index, has returned just 13.20%. Because of this, VCs can rely on Bitcoin and Ethereum to provide good returns without the high risks that other industries may bring.

Cryptocurrency investment trends shift

During the last cryptocurrency cycle from 2020 to 2024, many VC firms were active in the market but mainly invested in projects that had already gained popularity. Cochran noted that this strategy allows them to benefit from existing trends while avoiding the risks associated with emerging projects.

He also mentioned that some of the recent hot trends in the cryptocurrency industry, such as NFTs and DeFi, have lost some momentum, leaving the industry uncertain about the next big opportunity. Still, venture capital funding in the cryptocurrency industry remains strong, with three months in 2024 exceeding $1 billion in funding. However, that number is down from levels seen in early 2022, when monthly funding regularly topped $4 billion.

Cochran’s opinion highlights a more cautious approach to investing by VCs, who are opting for the stability of Bitcoin and Ethereum in an uncertain market environment. This shift reflects the maturity of the cryptocurrency market, with investors beginning to value long-term value and stability rather than just short-term high-risk, high-reward opportunities.

For cryptocurrency startups, this means they may have to work harder to prove their value and long-term viability to attract venture capital. At the same time, this may also push the entire industry to develop in a more stable and sustainable direction. As the market continues to evolve, we are likely to see more innovations and mature projects emerge, bringing new energy and opportunities to the entire cryptocurrency ecosystem.

[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.