After the bitcoin trend reversed, how much did VC's market expectations change this year?

Since the market's deep fall in late 2022, most expectations for the next cycle have been pegged to 2024, when bitcoin halves, rather than 2023. Judging by the start of the year, it seems so. Although the market sentiment ushered in the "spring agitation", but more or the rapid rotation of plates and hot spots, and no signs of new money entry.

When Silicon Valley banks exploded earlier this month, the ripple effect spread to crypto markets days later. There was a run on USDC because its publisher, Circle, had deposits in SVB, there was a big decoupling, and it looked as if the market would slide into the cold again. But surprisingly, the Fed's rescue arrived just in time to temporarily ease the liquidity crisis in the banking sector. That was followed by a "violent rally" in Bitcoin over the next two days, with a rare one-day gain of 20 per cent. The sudden rally has thrown many investors off their feet, leaving them wondering: Will Bitcoin rise again this year? BlockBeats has compiled a list of eight questions the market wants answers to, and asked the following prominent institutional investors for their thoughts:

BMAN, ABCDE Capital. ABCDE was founded by Huobi co-founder Du Koon and former Internet& crypto cofounded by BMAN, dedicated to investing in and supporting Web3 Builders;

Jason, Folius Ventures. Folius Ventures invests in, promotes, and participates in building the Web3 ecosystem, dedicated to supporting Asia-Pacific and Chinese entrepreneurs;

Pima, Continue Capital. Founded in 2016, Continue Capital is focused on investing in and incubating global blockchain technology, early-stage technology startups and providing quantitative trading services;

Bill, Cypher Capital. Cypher Capital is a multi-strategy Crypto investment fund based in the United Arab Emirates, covering VC, secondary markets, nodes, BTC mining and other areas;

Jerry, Synergis Capital. Synergis Capital is committed to investing in the next generation of early stage start-ups and driving their growth by activating its own network of paradigm leaders.

In the past week leading up to March 24, there have been a number of unexpected events and big changes in the price of bitcoin, which further highlights the insights of investors. Here's a sampling of BlockBeats' questions and responses from institutional investors:

1. BTC rose for several days in a row and hit the $30,000 mark. What is your judgment on the direction of the crypto market in the second half of 2023? How long will this BTC bull market last?

BMAN - ABCDE Capital: The market has been through multiple rounds of deleveraging and we observe a lot of institutional money buying in the $18,000 to $20,000 range of BTC, tending to believe that a bottom has been seen and that new lows will not be made. In the second half of the year, a number of large projects will be launched online test network, and next year bitcoin will be halved again. The market is still short of a bull market narrative, just like the DeFi Summer in 2020, which is worth looking forward to.

Jason - Folius Ventures: I am pessimistic. The shift from tightening to easing is under way, but the easing of risky asset prices and the possible return of inflation could lead to a policy mistake by the Fed, combined with a real minefield and a deeper recession. The market is likely to price this in Q3. Personally more inclined to work hard in the first half of the year, the second half of the step by step.

Pima - Continue Capital: More than $40,000, cautious in the second half.

Bill - Cypher Capital: BTC has been consolidating in this range for more than half a year since LUNA event in 2022, when it fell below $30,000. Since LUNA incident is caused by superimposed macro factors, part of the capital left the market and led to the decline. If we can see more capital re-entering the market, we will be confident about the subsequent trend of BTC. This SVB event is the first time that bank shares and BTC have completely different prices. We think there may be more such parting of the ways in the future.

Jerry - Synergis CapitalThe overall direction of the crypto market is closely related to the macroeconomic environment. This time, the Fed raised interest rates by 25 basis points, the market reacted to the end of the interest rate hike cycle after the interest rate hike in May. This is the first turning point of the interest rate hike cycle from hawk to dove, and we expected the result after "something broke". Although the Fed has been a bit more hawkish on the dot plot than markets had expected for the time being, it is also a means of keeping the loop in place until inflation does not come down. Overall, we believe the short-term peak of tightening has passed and the Fed will continue to ease near-term liquidity demand, so we continue to like this bull market in the near term. How long it lasts in the medium term depends on how weak the US economic environment is in the second half of the year and on inflation data that reference the stickiest sectors, wages and non-housing services. In the long run, the theme of the cyclical macro narrative has changed from the bottom up, and the supremacy of the US dollar and US bonds is being shaken. With the change of the new order under the deglobalization, crypto assets have the opportunity to flourish on the stage of the currency disputes, but it will also be accompanied by continuous fluctuations.

2. Many people believe that the liquidity crisis is the major problem for the crypto and global markets in 2023. In your opinion, will the liquidity crisis be resolved after the Federal Reserve announced a rescue plan for SVBS two weeks ago and a series of subsequent measures to improve liquidity? Has the market's long-awaited "reversal" node arrived?

BMAN - ABCDE CapitalSame as question 1.

Jason - Folius Ventures: Not completely solved, but the market has roughly anticipated future problems, and the Fed is about to make easier choices because of them. So even if the problem is not fully resolved, I think risk assets will continue to improve in the first half of the year.

Pima - Continue Capital: All parties game to pressure the Fed, short-term liquidity relief; The global confrontation has led to the reversal of the low-inflation globalization division of labor mode of "cheap energy + demographic dividend low-end manufacturing + consumption". The second half of the year is a window for observation, so it is difficult to talk about the reversal.

Bill - Cypher CapitalIt is important to note that the Fed's BTFP program addresses the liquidity crisis in banks and liquidity in risk asset markets. The BTFP programme does not permanently remove assets such as bonds from banks' balance-sheets, unlike previous QE programmes. Since the cryptocurrency market has rebounded a lot after the bank bailout, we should be more forward looking at the issue of market risk.

Jerry - Synergis Capital: We believe that the SVB rescue package coupled with continued rate hikes have confirmed the Fed's commitment to addressing short-term reserve shortfalls through the use of balance sheet facilities, so we believe the reversal point has arrived and that the peak of the short-term liquidity squeeze has passed.

3. In the past week, BTC made a rare one-day gain, but ETH did not make much progress. How do you understand this market performance? Is new money coming in, or is liquidity being collected and concentrated?

BMAN - ABCDE Capital: On the one hand, funds to avoid bank bankruptcy flow into BTC, on the other hand, the initial rise of the market is the blood-sucking market of BTC.

Jason - Folius Ventures: BTC follows gold + long bond trading recession more, while ETH follows NASDAQ and long bond trading more. BTC is widely distributed by the currency circle mechanism. When risk assets rally again due to easing, ETH should outperform BTC.

Pima - Continue Capital: ETH had a rally of $800 to $2000, touching the long-term average; BTC has never had a rally of this magnitude, so let's make it up later.

Bill - Cypher Capital: It is difficult to explain the short-term fluctuation itself, if you want to pay attention to the price trend, there is a saying that "When in doubt, zoom out." And only look at the fluctuation of ETH itself is one-sided, for example, Arbitrum in ETH ecology is very popular recently. But this is not necessarily immediately reflected in the price of ETH itself. In addition, if we Crypto industry and traditional industry comparison, then BTC is "gold", other coins are "business", BTC in the past week, in a sense played the role of "safe haven assets gold".

Jerry - Synergis CapitalWe don't think there's been a lot of outside money flowing into the crypto market, which has been in rotation and PVP since the FTX incident. This time, bitcoin's rally is mainly due to Stablecoins and other currencies into the safe haven of bitcoin caused by money. Another part of the problem is that U.S. regulations have the potential to treat all cryptocurrencies other than Bitcoin as securities, making Ethereum's value storage properties relatively less secure. Bitcoin has historically been viewed as hard currency in the crypto world and as an alternative to the traditional financial system, so the current narrative of a banking system under pressure adds to its performance. We expect some money to flow back from Bitcoin to Ethereum and other riskier currencies as fears of a U.S. banking meltdown recede.

4. If new funds do enter, will these funds continue to flow into ETH or other public chains, driving the growth of DeFi, NFT and other sectors? Where will you lay out?

BMAN - ABCDE Capital: We believe that there will be capital plate rotation in the future, will be the layout of each plate leading projects.

Jason - Folius Ventures: High probability. None of the existing plates are very elastic. Individuals are still waiting for the application layer. You can follow the flow of ARB airdrop funds.

Pima - Continue Capital: New funds will be shunted, not the general rise; Individuals will lay out new public chain, L2, ominchain direction.

Bill - Cypher CapitalI'm sure I will. Cypher does not intend to build an ETF of a certain sector, so we will make layout in all sectors. Meanwhile, we also expect entrepreneurs to witness the birth and growth of new sectors.

Jerry - Synergis CapitalEthereum will receive a Shanghai upgrade this April, which will allow the unlocking of pledged Ethereum. Although it may bring some uncertainty to the price of Ethereum in the short term, we believe that this upgrade will greatly increase the amount of collateral on the ethereum network, and at the same time benefit the price of ethereum, so that the exchange rate of ethereum/Bitcoin will also increase. This will further increase the network benefits of the Ethereum ecosystem, making it harder for other public chains to thrive. On a sector-specific basis, given the recent regulatory uncertainty, we are relatively cautious in investing in web2.5, particularly in the web3 enterprise services and permissioned DeFi track. As a relatively active VC of creator economy in the industry, we continue to incubate and invest in head teams accurately in all parts of the whole value chain. Given the return of liquidity, DeFi will also be a track we focus on, especially in terms of decentralizing stablecoin and options trading innovation.

5. In the short term, do you prefer BTC or ETH? What are the reasons?

BMAN - ABCDE Capital: Short-term optimistic BTC, bank bankruptcy crisis has not been lifted, short-term funds will enter BTC.

Jason - Folius Ventures: Both watch, the narrative is different. I don't want to choose between the two.

Pima - Continue CapitalThis question should not be considered.

Bill - Cypher Capital: I am personally bullish on BTC in the short term because it is a migration of funds to "backed by math, instead of backed by centralized protocol" under the global macro narrative. Cypher is in the crypto market for the long term. We are not so focused on short-term market fluctuations. Both the BTC and ETH ecosystems have innovative and active ecosystems, and Cypher is actively deployed in both.

Jerry - Synergis CapitalBitcoin has proven its special place and attributes in the blockchain world, but we should not underestimate the powerful network effects of Ethereum's deflationary token economy model and its ecosystem including secondary public chains. The secondary public chain ecosystem helps to solve the expansion problem of Taifang. Currently, the most innovative projects are still built on EVM, and traditional enterprises will prefer Ethereum L2 if they want to enter the blockchain. Bitcoin, by contrast, lacks many of the applications that Ethereum has, a gap that is likely to become more pronounced in the future.

6 Arbitrum airdrop again ignited its ecological development, do you think the Arbitrum ecological heat can last for a long time?

BMAN - ABCDE CapitalThe battle for Layer2 has just begun and will continue until ZK's Layer2 project goes live.

Jason - Folius Ventures: Very healthy. Should be one of the most opportunity floors. I think we can look more at the benefits Axiom + EigenLayer brings to aether ecology.

Pima - Continue Capital: Yes.

Bill - Cypher CapitalArbitrum announced the airdrop standard and snapshot time, we did not see a significant decline in the chain of active data, which shows that the user is sticky to its ecology. We look forward to seeing the Arbitrum ecology develop further.

Jerry - Synergis CapitalSince its launch, Arbitrum has shown steady organic growth in the ecosystem of decentralized financial services DeFi and gaming, even when its token airdrop expectations are uncertain. At present, Arbitrum has the support of many partners, and its own protocols are constantly innovating. In particular, Stylus will have the opportunity to introduce a large number of developers who used Rust on Solana to Arbitrum ecosystem. Therefore, we continue to have a bright future for Arbitrum.

7. Except Arbitrum, Lens, zkSync, StarkNet and other projects all have airdrop expectations. Which ecosystem will you focus on interacting with in the second half?

BMAN - ABCDE Capital: Layer2 ecology to experience.

Jason - Folius Ventures: ZK track landing takes time. Personally, I think Scroll will be a dark horse. In addition, SUI can also be seen in App.

Pima - Continue CapitalI don't interact much, but I can name some projects worth interacting with: zkSync, StarkNet, Sui, LayerZero.

Bill - Cypher CapitalAs institutional investors, we focus more on long-term investment.

Jerry - Synergis Capital: We like the agreement that makes innovative progress in DeFi and web3 gaming. As for airdrop expectations, we'll be looking more at the companies that have received a lot of first-tier capital injections in the primary market, such as Celestia, Sui and emerging agreements such as Scroll.

8. Recently, with the advent of Ordinals, "BTC ecology" has suddenly become a buzzword, with traditional old projects like Stacks, issuing tokens, and new directions like NFT getting attention from outside the BTC OG community. But from what we've seen, while the heat is still there, hyping tokens or NFTS on BTCS is very sophisticated and primitive. Do you think "BTC ecology" is a flash in the pan or a new trend that will last for a long time?

BMAN - ABCDE Capital: The BTC and PoW camps have long had loyal communities that believe and expect an innovation ecosystem to emerge around BTC.

Jason - Folius Ventures: Stacks Ecological time requirement. Not suitable for short stir-fry. The real volume will have to wait until their EVM comes online, just before BTC halves in 24 years. Should be the most resilient narrative in the entire market.

Pima - Continue CapitalAt the end of 21, Taproot upgrade was the main reason for all this. In the long run, it may fail in four years, but in the short run, it is a proposition that is hard to be falsifiable. There are "poor expectations" in the market, but it is the source of profits, which is worth paying attention to.

Bill - Cypher Capital: Any innovation in the early stage is not that mature in terms of UI/UX. Cypher always has a positive attitude towards technological innovation. Cypher bid for TwelveFold and was lucky enough to get a Ordinals. We welcome entrepreneurs who have ideas and projects in BTC ecology to discuss with us at any time.

Jerry - Synergis Capital: Bitcoin has the largest group of holders and the most loyal community foundation. From the data experience of the sustainable development of lightning network ecology in the past, the probability of BTC ecology is not a flash in the pan. Our fund has a systematic layout in BTC ecology for a long time, but we believe that the smart contract technology and deployment is indeed significantly behind Ethereum ecology.

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