Why are VCs betting big on crypto and AI?

introduction

VCs are increasingly interested in Crypto x AI. Just last week, Sentient received $85 million in seed funding from top investors including Peter Thiel's Founders Fund, Pantera Capital, and Framework Ventures. While the combination of AI and cryptocurrency may seem like a fad, more and more projects are attracting the attention of top investors, and the likelihood of success is increasing.

First principles thinking

The intersection of Crypto x AI presents a unique opportunity: to build a new financial and AI ecosystem based on first principles, built on the value of crypto. The world doesn’t need another Instagram or a Nasdaq with slightly lower latency, but rather entirely new ways of interacting, collaborating, and exchanging value. Crypto x AI has the potential to build entirely new systems from the ground up, creating a host of new opportunities for startups and investors.

The inevitable rise

AI’s influence is everywhere, from chatbots to advanced tools, and has become a necessity in our work and daily lives. As people’s reliance on AI increases, a powerful network effect is formed: the more it is used, the greater the value. Venture capital firms are seeing this. Pantera’s Cosmo Jiang said: “In 10, 15, 20 years, everyone will use AI,” so investing in AI companies will be as wise as investing in companies with websites back then.

Just like the Internet, AI is going mainstream. And the combination of Crypto and AI is becoming increasingly powerful. Future cryptocurrency users may not only be humans, but also AI agents. Experts predict that by 2030, Crypto x AI will contribute trillions of dollars to the global economy. By entering early and supporting the right players, venture capital firms hope to capture a significant share of this emerging field.

For most VCs, the golden hour of AI has passed. High valuations of companies like OpenAI, xAI, and Anthropic have made it difficult for many firms to participate in large tech AI deals. Cryptocurrencies offer an attractive alternative - a way to participate in the future of AI without writing a huge check. In addition, VCs are also buying Crypto x AI tokens on the open market, such as Polychain, Digital Currency Group, and dao5, which have purchased hundreds of millions of dollars of $TAO (Bittensor). It is worth noting that retail investors also have the opportunity to participate.

Trust gap

The current state of AI is like a high-stakes poker game with hidden cards. Companies like OpenAI have developed solutions worth billions of dollars based on closed-door research, which may be beneficial to them, but also creates a huge trust gap for venture capital firms and the public. In contrast, Crypto x AI emphasizes open source development and token incentives to build AI that serves all participants, rather than serving companies or countries.

Venture capital firms believe that an open source approach will lead to faster innovation, a broader talent pool, and ultimately greater benefits for all involved.

FOMO (Fear of Missing Out)

The tech industry is no stranger to hype cycles, and the discussion around crypto and AI is no exception. It’s the opportunity to realize big returns, and even create a sense of urgency and FOMO. While the specifics are still a little fuzzy, Crypto x AI is a narrative that’s hard to resist. However, it’s important to acknowledge the inherent uncertainty. Venture investing is still an educated guess, and professionals are learning as they go.

Will Crypto x AI be the best narrative of this cycle or just another overhyped fad? Only time will tell. For now, it’s clear that we are still in the early stages of this exciting space and venture capitalists are placing bets with a mix of optimism, caution, and a dash of speculative enthusiasm.

in conclusion

Venture capital firms are betting big on the combination of cryptocurrency and AI, seeing it as a huge opportunity for the future. Through technological innovation and grasping market demand, Crypto x AI is expected to become the next big thing. Are you in the right position?

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