VC alias Venture Capital – Practical Examples and Inspiration

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VC and Cryptocurrencies

Take a look at the chart of BTC, ETH and other similarly sized tokens. Set up a weekly chart and focus on the lower values where the price has gone sideways. At this stage, VCs were buying into the stock (accumulating). Then look at the upward movement, and this is the phase where VCs gradually sold off.

If you would like to invest with whales, just do a bit of research to find out which tokens VCs are interested in. These tokens are likely to have a previous bottom and a recent peak in price. You can use this as an indication of when it might be a good time to buy and when it might not.

VCs will also have researched the selected tokens in more detail and if they are yet to add them to their portfolio, you can expect more buying pressure.

VC and NFTs

NFTs are such a new and illiquid market that the door has not yet fully opened for VCs. Therefore, it was very easy to get rich in the NFT industry in 2021. The environment was not as hostile for small investors. But that is slowly changing. Some VCs have already started investing in all kinds of NFT industries.

From the NFT world, the easiest concept to understand is GameFi and Metaverse.

This is because it’s a business model where by holding Play-2-Earn NFTs you are taking part in the cashflow of the game. Virtual estates are situated similarly. While their monetization is not as obvious as that of GameFi’s, there is a vision of user activity in the virtual space that I would compare to 3D social networking. And, as we know, for example Facebook provides a virtual 2D space while making money from advertising.

Whether it’s land, a gaming asset, or an infrastructure investment (e.g., a Node), some gaming and metaverse NFTs can climb into the hundreds of thousands to millions of dollars. Such investments can be afforded mostly by VCs.

Most well-known crypto VCs

The most well-known crypto VCs according to

  • Binance Labs – founded by the Binance exchange.
  • Coinbase Ventures – founded by the Coinbase exchange.
  • Digital Currency Group – focusing on bitcoin and blockchain.
  • TRGC – focusing on DeFi.
  • 3AC – Three Arrows Capital – used to be considered a top VC, but experienced heavy losses in 2022.
  • Animoca Brands – mostly focusing on GameFi and the metaverse. Attached is a sample of  their portfolio.

VC investing

VCs always research and assess the profit potential of an investment before deciding to invest their money. These funds compose their portfolios to minimize risk. They do this by carefully monitoring and rebalancing the investments in the portfolio and, most importantly, by timing the purchase and sale of investments.

I remember the head of MakerDAO in a YouTube interview in 2020 describing their profit taking strategy (exit strategy) for the next bull run. He was describing the five price levels at which they would exit. The final profit taking step was supposed to be when the total market cap of cryptocurrencies reached three trillion USD. In retrospect, I think they had a really beautifully set investment strategy. After all, three trillion was the absolute top of the 2021 bull market. Other VCs are also moving in a similar fashion as MakerDAO.

A VC does not necessarily mean a profitable investor

There are also those who are called “degen” VCs in the cryptocurrency world. This is the community’s way of referring to an incompetent VC which invests like an amateur and loses money. A prominent example is Three Arrows Capital (3AC), one of the largest VCs in the crypto world.

Its biggest fiasco was its purchase of the cryptocurrency LUNA for $559.6 million. They practically lost all this money because the LUNA cryptocurrency collapsed after the UST failed. The collapse of this project caused cryptocurrency prices to fall so dramatically that the 3AC fund ran into further problems.

Subsequently, they had to pay 15,250 BTC (305 million USD) and 350 million USDC for their crypto loans. This was because they had borrowed a large amount of cryptocurrencies on which they speculated that their value would rise.

However, with the fall in cryptocurrency prices, these loans were causing the debt to grow and the fund was losing more and more money. It got to the point where it no longer had enough money in its account to cover the debt, which kept growing. The VC started receiving payment notices and because nobody responded to the notices, its debt reached such a level that the exchange seized all the money in its account to pay the debt.

This happened in the second half of January, 2022. The debt was repaid by selling a large amount of borrowed BTC. This caused an impulsive drop in the price of BTC, and this then also impacted the price of all other cryptocurrencies.

Author: Rocket Unit


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