Big bets on Web3, DeFi continue despite crypto concerns

Big bets on Web3, DeFi continue despite crypto concerns

Taking a look at the crypto industry, participants would be forgiven for thinking that several sectors, including DeFi and Web3, are in trouble.

With confidence shaken for private and institutional players – spurred by the discord over crypto lending – deploying capital at a time of uncertainty is not without inherent risks.

Regulation promises to tighten controls over how crypto capital is used, deployed and deployed, although some say more still needs to be done to protect investors.

Looking through a global macro lens also highlights less promising signs of early recovery in broader markets, namely stocks that are often closely correlated with crypto.

Concerns about global food shortages as a result of the pandemic - exacerbated by Russia's invasion of Ukraine - as well as rising inflation and central banks' leveraging of interest rates to combat it, has only strengthened the case for a "low-risk" environment.

In fact, investment in the crypto capital market has slowed as money that flowed into emerging projects from the fourth quarter of last year to the first quarter of this year has waned.

Although for some, like Stan Miroshnik, partner at 10T Holdings, a mid- to late-stage private equity firm focused on digital assets, “unique opportunities” for investing in the market still exist and are beginning to turn around.

“We’re just starting to see interesting deals come back into the market at more reasonable valuations,” Miroshnik said in an interview with Blockworks.

Others in the crypto investment sector have also increased their efforts to capitalize on or promote the efforts of companies seeking to build Web3 and DeFi infrastructure amid bear market conditions in the hopes of reaping greater profits in better times.

Crypto investment firm Multicoin Capital, which has backed several Web3 and decentralized finance projects, announced earlier this month that it would inject an additional $430 million into crypto startups.

Continuing this trend, early-stage investment firm Konvoy Ventures has launched a $150 million fund aimed at emerging gaming companies focused on a range of industries, including Web3, while Binance's venture capital and incubation arm closed its $500 million fund in early June.

Most venture capital firms and funds are betting heavily on the Internet's transition to a more decentralized and democratized version of information sharing and engagement, including the tools and infrastructure that decentralized finance holds promise for this transition.

Discussions from those developing these key infrastructure rails in the industry are now focused on building on a less than frothy market after crypto lenders were hit by the implosion of Singapore-based hedge fund Three Arrows Capital.

Turning a threat into an opportunity

“Anytime there is a significant event, you watch and learn,” Bette Chen, co-founder of DeFi Layer 1 smart contract platform Acala, told Blockworks in a separate interview. “This is a moment where you can see problems being uncovered, and for builders these are actually opportunities where you can build strong systems.”

It is companies like Acala that continue to improve the deficiencies in industry sectors – including DeFi and Web3 – that Miroshnik and others like him are most interested in.

The 10T co-founder said his fund was watching many blue-chip names, including Fireblocks, OpenSea, Dapper Labs, Alchemy and Chainalysis, which he said had previously been overpriced on a multiple earnings basis where they traded at more than 50 times the companies' total revenue.

"Now those valuations are coming down in the secondary market. And so you could theoretically buy some of these blue-chip names at more reasonable valuations," he said.

10T, like other funds in the industry, is approaching its investment thesis by deploying capital across four verticals, including NFTs and Metaverse, DeFi infrastructure, gateways such as wallets and exchanges, and companies leveraging a token incentive engine for such real-world use cases as seen on the decentralized wireless network Helium.

When asked about the fund's short- to medium-term prospects, Miroshnik said, "Money waits, not trading," and offers some sage advice to retail and institutional investors who want to track the capital deployment of some of the industry's largest funds in lockstep.

“If you want to go deeper and make those vertical bets, they are already clear leaders,” the co-founder said. "You don't have to buy the new GameFi tokens. Ideally, you just buy something where you know there's already a lot of momentum."

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The post Big Bets on Web3, DeFi Continue Against Crypto Concerns is not financial advice.