Eastern and Western Market Perspectives and Some Reflections
Author: Lao Bai, Partner in Research and Investment at ABCDE Capital and Advisor at Amber Group
It seems like this is the longest hiatus Twi has ever had. The reason is simple—being a blogger who never takes advertisements, writing requires a certain drive fueled by the urge to express, and the market over the past few months has made it difficult to feel that urge. The decline of the secondary market surely contributes to this feeling, but it might be the primary market’s state that is the main reason behind this lack of expression.
However, recently I’ve observed some phenomena and have had some reflections, which might take a while to discuss, so I plan to break them up into three or four posts. The main topics will be: “Market Perspectives in Eastern and Western VC”, “New Signs in RWA”, and “Some Things Worth Mentioning About ETH and Solana”.
Today, I will talk about the first topic.
In the past few weeks, I’ve had discussions with several colleagues in Asia and found that they have collectively entered a “pause” or “conservative” investment mode. Our most recent move was in January, and several of my colleagues were in a similar situation. Cases where they haven’t made any moves in two or three months, or even longer, are not uncommon. And when it comes to the market, the word “boring” seems to be the most fitting description, or perhaps, the current “consensus”.
This sense of boredom is not entirely tied to the secondary market. I clearly remember that after the Luna collapse, even though the secondary market was sluggish, we were still excited about scalable projects, discussions on ZK, and innovations in DeFi, GameFi, and AI in the primary market. That sense of excitement, however, has gradually faded as we entered 2025. The decay in the secondary market quickly dulls any narrative, and naturally, it affects the primary market emotionally. But what’s more concerning is this fear—have we reached the stage where the “low-hanging fruits” are largely picked, and are we entering a long period of adjustment, exploration, transformation, and the accompanying painful transition? I will elaborate on this later, as the situation in Western VC is a bit different from the Eastern side.
This thought came from a DeFi project we invested in during the pre-seed round last year, which is now raising its seed round. Initially, I thought that in the current primary and secondary market, I would be content as long as they could raise the target amount. But to my surprise, they overshot by several million dollars, with several Western VCs scrambling to throw money in. This outcome shocked me. The project itself is good, but it’s not top-tier. Why, while we in Asia are “falling silent,” are Western investors still “firing”? What’s the reason behind their confidence to “pull the trigger” on valuations at this point?
We had some internal discussions and made some irresponsible guesses, such as:
- The timing of when Western VCs were founded differs from Asia, leading to different exit cycles and, consequently, different investment decisions.
- Asian VCs tend to have a “small town scholar” mindset, focusing on either outperforming peers in terms of returns or at least beating BTC (although given the current market conditions, I doubt many can achieve this), whereas Western VCs are more idealistic and long-term-oriented. In other words, as long as they can logically justify to their LPs why they’re investing at this valuation, the obsession with returns is secondary.
- There’s a pure “deploy fund” need—investing in this round to quickly fundraise for the next, primarily to collect management fees.
The exact reasons remain unclear, so in the coming weeks, I’ve scheduled some discussions with partners and researchers from several Western VCs. Besides exchanging views on the market, I also want to directly ask them about the issue above. After gathering all the information, I will update everyone on Twi.
Now, going back to the topic of “low-hanging fruits,” I’d like to take this opportunity to discuss the future path of Crypto.
First of all, both I personally and ABCDE have never wavered in our long-term bullish belief in Crypto, and this can even be considered a kind of “faith”. Otherwise, we wouldn’t be fully dedicated to this career. But in the short and medium term, we do find ourselves at a crossroads, one that I’m unsure is similar to the one before the 2019 DeFi Summer. Hence, I’m sharing this with you all.
The trigger for this thought is also due to a recent podcast from Alliance DAO, where three points made by them really resonated with me:
- Qiao mentioned that his current feeling is similar to what it was back in 2019. He didn’t know what the next step in Crypto would be until the 2020 DeFi Summer appeared, which gave him a clear direction.
- They believe that Crypto has only found one PMF over the years, which is finance, and more specifically, trading (Dex, Cex, Perp), lending, stablecoins, and Mint (asset issuance, e.g., Pumpfun).
- They gave advice to many AI x Crypto start-ups, suggesting that if Crypto elements in the project are too forced, it might be better to remove them and focus purely on AI. As a result, 30% of the projects actually removed Crypto elements and became purely Web2 projects.
Regarding point 1, although I joined the space in 2019, I was just speculating with coins. Honestly, I’m unsure if VCs back then felt the same “bored” sensation, but at least, there were still IEOs dominating the market, EOS was exploring directions, Starkware introduced the ZK concept, and many of the DeFi Summer projects in 2020 were probably founded and funded in 2018-2019. The primary market at that time was probably better than it is now. In other words, the belief in “something big is coming” back then was likely stronger than it is now?
Regarding point 2, it’s a response to point 1 and also my biggest short- to medium-term concern—whether we’ve reached a crossroads where the “low-hanging fruits” are mostly picked, and this is different from 2019.
If the greatest PMF for Crypto in terms of utility is finance, then the DeFi Summer and the subsequent years of micro-innovations have likely reached a boundary today. And the opposite of utility, which Crypto also excels in, is narrative. Meme is undoubtedly the best representative, and in 2024, Pump.FUN took this direction to the boundary as well.
Furthermore, in recent years, when both utility and narrative seemed uncertain, our circle has still been able to focus on Infra. From ETH to EOS to Solana, and now to Aptos and Sui… I’m wondering, with Solana having Firedancer, and Monad and MegaETH likely launching their mainnets this year, have we also reached the boundary in blockchain Infra expansion?
Regarding point 3, if all three paths at this crossroads have reached their boundaries, then is the last one left, namely “modularization of blockchain”? This also relates to the third point above, and I’ve heard similar insights in YC’s podcast.
By “modularization” here, I don’t mean Celestia’s modularity, but rather abstracting the blockchain technology as a whole into a module, similar to how AI is implemented in start-ups. Most of the Crypto projects we see today are entirely based on Crypto or are Crypto for the sake of Crypto, rather than solving a real-world problem. The term “Crypto Native” sounds good, but in reality, they don’t venture beyond the circle—they’re just entertaining themselves.
Web2 AI venture capital circles are likely facing a similar issue, with many projects seemingly “AI for AI’s sake” instead of solving a concrete real-world problem.
Will there be a convergence between Web2 and Web3 in the future primary market, or will there be an intersection? A project must exist to solve a specific real-world problem. In the process of solving that problem, if it needs to use Crypto, then Crypto elements are incorporated; if AI is needed, AI elements are added. But the original intention and purpose are unrelated to Crypto and AI, just like how Meituan Delivery uses 5G, platform software, big data, AI task distribution… but fundamentally, it is a project created to solve the problem of getting food.
If the next big phase of Crypto takes this form, would you find it boring? Can the current form of Crypto VC, exchanges, studios, and other industries based on the Crypto Native ecosystem continue?
Currently, many of the primary market projects related to Payments and RWA align with this third idea. I’ve recently looked into Ondo’s Global Market and discussed several RWA projects, so the next post will focus on the new direction of RWA in this field.
Original Link: Lao Bai’s X
