Partnered With:

Encrypting old Guns' Winterization: When will it come back? What will drive the next bull market?

Read this article in 24 Minutes

What investment strategies are best suited to the ever-changing crypto world? What narrative will drive the next bull market?

原文标题：《机构支招熊市生存指南：何时迎来复苏，下轮主流叙事会是什么？》

原文作者： Nancy，PANews

Everything has a cycle, and so does the crypto market. After two years of capital feast, the severe shrinkage of data on each necklace in 2022 is enough to see the fierce market, especially the collapse of many giants to make this encryption winter especially bitter.

Bear markets are often a good time to Build, reflect, and capture opportunities. What is the best investment strategy for dealing with the vagaries of the crypto world? What narrative will drive the next bull market?

To this end, PANews spoke to NGC Ventures, Cobo, Hashkey Capital, SevenX Ventures, Web3.com Ventures and Bonfire Union 6, owned by Mask Network Home to the investment veterans through the bull and bear, take a look at their survival guide?

Crypto bear market investment play and experience

In 2022, the crypto market "thunder rolling", a series of thunder events hit many investors unprepared, the value of the assets held by the discount, even lost water, and liquidity drying up crisis is the market sentiment to the freezing point. In the eyes of investment veterans, it was a year of "too much", "debt", "deleveraging" and "drama".

"Herding is particularly evident in this industry, and we are led to believe in what everyone agrees and praises. The problem is that many things need to be judged and thought about. Luna and FTX have been successful with herding, and if there had been more critical thinking, perhaps they would not have been so successful and disastrous in the aftermath. Independent thinking and criticism will be particularly important after this year, but the industry would not have progressed as quickly if it had not been for these events, which reflect and expose a lot about the people and projects in the industry, including the legitimacy of some sectors." "NGC Ventures said.

Cobo co-founder Shen Yu pointed out to PANews that multiple negative events will bring: 1. Strong regulatory involvement. The United States, Dubai, the Republic of Korea, Singapore, Japan and Hong Kong have adjusted their regulatory efforts and improved their regulatory structure. 2. Institutions began to reflect on CeFi's risk exposure in the crypto market, and DeFi's institutional acceptance was greatly improved; 3. After FTX, the trading platform and market-making institutions shall initiate the process of self-compliance supervision, clarify the boundary of fund management, and adopt third-party custody as a necessary condition for institutions to allocate digital currency assets.

In the opinion of Xiao Xiao, chief investment officer of Hashkey Capital, the market will be more rational and learn from previous lessons. There are some thunderbolts we all know are going to pop, and some bubbles we all know are going to pop, but that day may come sooner than we think. So there's no need to follow suit blindly.

In the same way, Web3.com Ventures also believed that people would be more cautious in investment decisions in the future, have more in-depth requirements and researches on projects, and pay more attention to whether projects can generate positive external value.

In fact, in the face of a volatile and unpredictable macro environment and market, investors often need to constantly evaluate the market and investment strategy, especially this year experienced too many black swan events. Xiao Xiao pointed out that our Fund III was raised in the second half of the bull market. The strategic planning of the whole Fund in the future has taken the industry cycle into account. The layout of the important track is still to be laid out, especially the layout of some long-term valuable track in the bear market. However, there may be some small changes in the execution of the deal, such as the pace control, the whole due time period is longer than in the bull market, or the CeFi type of project will be more focused on the way the assets are held, and the post-investment risk control will be more closely followed.

Web3.com Ventures also made some adjustments based on market conditions, including learning and drawing on part of the investment standards of traditional industries and strengthening legal and financial requirements, so as to help the healthy development of cryptographic start-up projects. "In this market, the valuation of many projects tends to be within a reasonable range, which is a good thing. However, the relationship between a low valuation and a good project is not equal. Therefore, for our fund, we still decide whether to invest in a project based on the research and research of products, teams and other aspects."

Bonfire Union, a venture capital fund owned by Mask Network, told PANews, "Basically, the investment logic of various institutions is slowing down. When the market is relatively poor, they will focus more on Mask's own projects. At the same time, they will continue to support web3 social circuit in terms of ecology and investment. "We're definitely going to continue to sell, but we're also going to focus more on the collaboration between our portfolio companies and our own business. Bear markets give investors a longer window of time to decide, to wait, to do more research, to go back and forth a few times, rather than having a conversation like a bull market when it's too much fun."

When is the window for recovery? The old Guns' Winter Bending '

In 2022, the crypto market suffered a lot after several stress tests. Not only did the market value shrink significantly, but also the market confidence was weakening. It can be imagined that the recovery process of the industry is bound to be a long and difficult process, and it can not be achieved overnight in a short time.

"Just as extreme events in 2021 create disaster in 2022, extreme events in 2022 create recovery and bull markets in 2023-2025. Next year is a big opportunity and a mystery. Because 2023 is supposed to be a year of reflection and exploration without the storms of 2022, the mystery is that we need new plates and themes. Each cycle is driven by new species, IC0 before, DeFi, GameFi and NFT last year." "NGC Ventures said.

God fish believes that next year is a year of accumulation, whether the market recovery has two preconditions: one is the lifting of the external macro environment interest rate hike. By the way, the shortest period of rate hikes in decades has lasted more than a year. If the rate hike starts in March 2022, it will take at least until mid-2023. The second is to find the next source of growth for the new killer app explosion. When layer 2 networks like ZK are gradually rolled out, we have a vague sense of the changes brought by the new technology, and the performance of the public chain is further advanced, but in fact, there is still no clear killer application; At the user level, we still don't know exactly what the application form will be that will allow the assets of a large number of ordinary users to flow into the crypto world. If the external macro environment and internal innovation pace do not keep up, the existing cognition of a 4-year cycle may be broken, and whether the bear market will become longer across the cycle remains to be observed and learned. When both internal and external factors make the market turn, we should gradually accumulate patience and adjust our investment strategies and expectations in time to face more uncertainties.

Bonfire Union says there will be a lot of failures in 2023, and there may be a bigger opportunity for mergers and acquisitions (though few are doing them right now). The global bear market has a long way to go, so at least the first half of the year shouldn't be a particularly good bottom-hunting opportunity. Industry recovery can technically expect ETH 2.0 to bring changes, but will be more influenced by the global financial system. Looking back, it's hard to say whether DeFi Summer was the product of big innovation or simply a move to match a riskier asset with cheaper money after 2020.

The assets that performed best in 2020 and 2021 (Crypto, Tech, software, spac) are all the worst performers in 2022 because of the big dollar. If the macro turn for the better, we should be able to see the signs of recovery in the second half of next year, but it will not be as rapid as in 2020, but we can certainly believe that the market will become much healthier after the end of this wave of bull and bear cycle, because Crypto this bull and bear attracted a lot of regulatory and mainstream financial institutions. There is a lot of constructive advice and an influx of high-quality talent. In terms of preparation, trying to survive the winter is the absolute number one priority, and everything else is a far lower priority.

"The crisis of trust is more about the traditional institutions, the practitioners in the industry should have faith or have faith. Especially for the primary market, many ecological players are still actively building, I also believe that there will still be valuable entrepreneurial projects next year. As for the overall secondary market may be affected by the crisis of confidence, but there may be regulatory policies introduced, bringing some positive impact; in addition, the market is still related to the macro economy, not only the Crypto field of its own decision." Xiao Xiao pointed out.

In this regard, Web3.com Ventures also agreed that the market environment next year will gradually get out of the trough from the macro point of view, but it will take some time for the overall market to recover to the last high.

But the prerequisite for success through a bear market is how to survive the winter? Experienced a number of bear market veteran VC also gave the "winter" experience. "Crypto winter is a difficult process for both the head and the startup. The startup needs to think about survival, while the head needs to think about how to maintain and grow the business. For many entrepreneurs, during this period more can focus on the development of technology and products, really to create a more practical product, of course, at the same time still need to keep the attitude of neither humble nor overbearing, rational use of funds, as the saying goes that gold will shine." Web3.com Ventures pointed out to PANews.

NGC Ventures, on the other hand, believes that the fact that we are in the middle of the winter means that we are in the hardest time and that things will get better next, just as the bull market will not last forever, persistence is the most important thing in whatever you do. For entrepreneurs, 2023 is the need for crazy struggle to accelerate production, because when the bull market comes to the need to have complete weapons and ammunition to rush.

At the same time, Xiao believes that compared with the previous bear market, start-up projects in this round of bear market may generally survive better, because the financing amount of projects in this cycle is generally larger than that of the last cycle, most of the high-quality projects have completed the financing before the bear market, and some of the projects have their own hematopoietic ability, which can support them through the bear market. For projects that have not yet completed financing, as long as the quality is good enough, financing will not be particularly difficult, because the market for investment institutions in this cycle is also much larger than last cycle. But start-ups still need to know how to spend their money, how to spend it in the right way and save on unnecessary expenses. 2023 must be a good time for value investing, with more rational markets, more reasonable valuations, and a more equal footing for start-ups and investors.

1, pay attention to cash flow: in fact, no matter the bear, early by financing or their own enterprise hematopoietic, cash flow should be the life and death line of entrepreneurs; 2, pay attention to safety: in the bear market to prevent the bankruptcy crisis caused by hackers." The divine fish has shared his sixth bear market "winterbending".

What will drive the next bull market?

The narrative of every bull market changes. Looking back at the last crypto bull market, DeFi, NFT, Layer1 and DAO were among the many popular narratives that attracted a lot of users and money. What narrative will lead the bull market in the next cycle?

God fish pointed out that one is the two-layer network. The problem of performance, or TPS, is one of the big tracks in the future of the crypto market. From 2017 to now, the big direction still needs to be solved by multi-layer network. In the two-layer network, ZK is the most likely, but there is still a long period before the final implementation and use. The second is the wallet technology scheme based on MPC. The balance between the security and application of the underlying private keys in the Crypto world has been the core issue that has prevented the entire industry from emerging a large number of new users. With the influx of traditional capital and a large number of new users in the past five years, whether GameFi or a game application like StepN, MPC based selfless key wallet can make the user experience and threshold more balanced; The third is DeFi. With the development of blockchain performance and underlying private key management technology, decentralized finance on the chain, including decentralized derivatives trading platform, will gradually emerge, and the whole DeFi interaction way and possible form will undergo new iterations.

In the view of SevenX Ventures, every time a bull market begins, new directions and new narrative structures brought about by the development of new technologies will lead to the expansion of the scene, becoming the center of capital gathering and the focus of users. In 2023, there are six directions to watch:

1. Credit lending based on DID, including the new DID system and credit lending based on the new system: credit lending is the mainstream of the real world, which can effectively improve the utilization rate of funds compared with mortgage lending. Credit lending on the chain is still at a very early stage, and the future is promising. SevenX believes that on-chain credit lending must be based on the DID system rather than a centralized on-chain model. DID requires extensive accumulation of multidimensional data, including transaction data and behavioral data, to build a user's reputation/credit system, and take this as a reference for credit decision making in lending services.

2. Decentralized data predictor: The predictor is the most important intermediate node connecting Web2 and Web3. At present, most prediction machines are focused on price, and in the future, faced with massive and various Web2 data migration to Web3 demand, data prediction machine circuit will inevitably give birth to a large number of opportunities. The reliability of the data source, the effectiveness and cost of the predictor are the directions that can be optimized for the predictor.

3. New content curation model: How to acquire information more efficiently is a proposition that follows the development of human society for a long time. The change of technology makes the mainstream way of acquiring information gradually evolve. In the era of Web2, the information we can access is controlled by the search engines and algorithms monopolized by large companies, while in Web3, the new content curation model and new governance mechanism constructed by Token economy, DAO, etc., enable the public to enjoy the recommendation of new content without being hijacked by centralized algorithms. It doesn't create a filter bubble. SevenX believes that the market space of content curation is far larger than it seems, because it actually affects the formation of one's knowledge system and even its values.

4. Innovative application based on ZKP: SevenX believes that ZKP is not just an infrastructure for capacity expansion and privacy, but a wide variety of decentralized applications in different directions will emerge through ZKP in the future, including existing games (dark forest), cross-chain Bridges, DID, decentralized governance and compliance, There are also some applications that we might not imagine right now.

5.Web3 advertising: Advertising is the most important business model supporting Web2, and the advertising business in Web3 will undergo a great paradigm change due to the return of rights (data ownership, etc.) to users, the complexity of attribution model and other factors.

6.Web3 culture and brand IP: IP operation is undoubtedly a profitable business. There are rich and closed-loop profit means around IP.

Web3.com Ventures sees three things to look forward to:

(1) Capacity expansion and privacy protection. ZK, as a widely recognized encryption endgame technology, has great potential in the related software and hardware markets. Our fund itself has done a lot of research and investment in the field of ZK. Before the foundation of the fund, it has been laid out in this field since 2019, which we believe is an important part of infrastructure construction.

(2) DID circuit will gain more attention after a large number of thunderstorms in CEX this year. Whether it is a necessary component for the further development of DeFi or a regulatory tool for the future crypto market, a more convenient and secure DID system will emerge;

(3) Infrastructure related to NFT. The infrastructure built around the NFT has received significant institutional investment in the second half of 2022. As the main carrier of the creator economy, NFT can bring more participants to the crypto market.