How did VCs deploy DeFi projects against the trend?


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# Blockchain 2020-11-14 09:27 1 11,332 Source: Tao said the blockchain

I wrote an article earlier and shared with you how traditional institutional investors such as Grayscale, MicroStrategy, Twitter CEO CashApp, etc. invest in Bitcoin. Such institutional investors are basically investors with more traditional styles. They see Bitcoin mainly from the perspective of traditional institutional investors such as security and liquidity, and treat Bitcoin as an asset similar to gold.

They focus on patterns that they understand, and at the same time tend to invest in assets that are closer to traditional concepts. They invest more in Bitcoin and less in Ethereum, or even none. The Twitter CEO clearly stated that the only digital currency he considers valuable is Bitcoin.

In fact, there are a large number of venture funds that invest in cryptocurrency projects. Their investment in blockchain projects is entirely based on the ecological thinking of the blockchain, and focuses on the future potential and value of the project.

Famous funds among these institutional investors include Fenbushi Capital, Polychain Capital, Coinbase, etc. For ordinary digital currency investors, the names of these institutional investors may be relatively unfamiliar, and their investment methods are even more unfamiliar.

The following two recent information can understand the style of this type of investor:

Message one:

On October 19, according to a tweet from Alex Svanevik, CEO of data analysis company Nansen, the wallet labeled Polychain Capital recently received 329 YFIs from Binance Exchange, valued at approximately US$4.6 million.

The Polychain Capital mentioned in this message is the investment fund I listed above that focuses on blockchain projects. It was founded by Olaf Carlson-Wee, the former employee of Coinbase, and currently manages more than $300 million in assets. Investment projects or companies include Coinbase, Matrixport, Oasis Labs, Compound, and Nervos.

Message two:

On November 10th, Balancer Labs, a Decentralized Finance (DeFi) protocol project party, has raised a round of millions of dollars in funding by selling its governance token BAL, and the participants are investment institutions Pantera Capital and Alameda Research.

Although Balancer did not officially announce the amount of this round of financing, according to Alameda founder Sam Bankman Fried (SBF), his company invested a 7-figure dollar amount, that is, at least 1 million US dollars, and Pantera Capital did not immediately Respond to a request for comment.

Pantera Capital here is a venture capital fund established in 2003. In addition to investing in Balancer, it has also invested in the currency project Thundercore.

Alameda Research was established in 2017. Its investment projects or companies include Perpetual Protocol, Frontier, Hedget, RAMP, Linear Finance, etc.

These funds are well-deserved blockchain venture capital funds from the perspective of the projects they invest in. In particular, Polychain Capital and Alameda Research have invested in a large number of DeFi projects.

I think there are two points that deserve our most attention:

1. Everyone fears me and is greedy

The time for these three funds to buy or invest in these DeFi projects is October and November.

As we all know, this wave of DeFi started in June this year, reached its peak in mid-September, and then began to fall into a larger round of decline, and then began to consolidate at the bottom in early October until recently began to gradually recover some popularity.

The period from the beginning of October to the present is when a large group of investors chanted “DeFi is cool”, but on the other side, institutional investors are boldly entering the market to buy projects they think are valuable.

This is the investment method that I admire the most about “people fear me greedy”.

2. Grasp value items without fear when the market is low

From the data of the news, we can analyze that the average cost of Polychain Capital to buy YFI is 14,000 US dollars, and the peak of YFI has reached 40,000 US dollars. Compared with the peak, the price of the fund has fallen by 65%.

Pantera Capital and Alameda Research bought the Balancer token BAL at a price of less than 15 US dollars, and the peak of BAL has reached 34 US dollars. Compared with the peak, when the fund bought, the price has fallen by 56%.

In this round of the DeFi token drop, countless small and medium-sized retail investors ran away panicked or watched frustratedly in the face of the endless decline, while these institutional investors were entering the market with large sums of money. These institutions may not buy the lowest price when they enter the market, but they are still not afraid of the market. I believe that they must believe that these projects have long-term value, and boldly buy when the market is already sluggish enough to judge that the downside space is not large.

In the article “The Current Investment Logic of Cryptocurrency” on October 25, I wrote “If these DeFi projects are valuable for a long time, and the price is so low now, should we boldly invest at this time?”

Today I will share with you the investment behavior of these three venture funds not to ask you what projects to invest in now, but to use data to show you how venture funds deploy projects when the market is scary.

Finally, I want to emphasize that the article has also focused on the analysis in the previous two days. According to the short-term price increase, I am not in a hurry to make a deposit operation recently. If I bought a currency for long-term investment, continue to hold it patiently. .