Market from the First-Person Perspectives of East and West and Some Thoughts

Author: ABCDE Capital Research Partner and Amber Group Advisor Lao Bai

It seems that this is the longest period of silence for Twi. The reason is simple: as a blogger who never accepts advertisements, every time I write something, it essentially requires a drive to express myself. But in the past few months, the market has made it difficult to feel that kind of drive. The sluggish performance of the secondary market is certainly a big factor, but the feeling from the primary market might be the main reason for this lack of desire to express.

However, recently, I have observed some phenomena and have had some thoughts. These might be a bit lengthy, so I plan to break them into three or four articles. The main topics are: “Market from the First-Person Perspectives of East and West VC,” “New Signs of RWA,” and “Some Noteworthy Things on ETH and Solana.”

Today, I’ll talk about the first topic.

Over the past few weeks, I’ve had discussions with several peers from Asia, and I’ve found that we all unintentionally entered a “pause” or “conservative” investment mode. Our most recent move was in January, and my peers were similar. There are many cases of not making any investments for two or three months, or even longer. As for the market sentiment, the word “boring” might be the most fitting description, or the temporary “consensus.”

This feeling of boredom is not entirely linked to the secondary market. I clearly remember that after the Luna crash, although the secondary market was sluggish, there was still excitement in the primary market when discussing scaling projects, ZK, or innovative DeFi, GameFi, and AI. But this sense of excitement has gradually faded as we entered 2025. The secondary market’s tendency to lose interest in any narrative after a few days inevitably has an emotional impact on the primary market. But a more concerning worry is—have we entered a stage where the “low-hanging fruit” has mostly been picked, and now we face a long adjustment, exploration, and transformation phase, with corresponding severe growing pains and a period of inactivity? I’ll expand on this at the end, as the current state of Western VCs is different from the Eastern ones.

The reason for this reflection is that we recently invested in a DeFi project during its pre-seed round, and now it’s raising a seed round. Initially, I thought, given the current state of both the primary and secondary markets, that I would be content if they managed to raise the target. However, to my surprise, they over-raised by several million dollars, with several European and American VCs rushing to invest. This result shocked me. The project itself is good but not of “S-class” quality. Why, while we in Asia are “firing blanks,” are European and American VCs still “shooting”? What makes them willing to “pull the trigger” at this valuation?

We had an internal discussion and made some ungrounded guesses, such as:

• European and American VCs were established at different times compared to those in Asia, leading to different exit cycles and, consequently, different investment decisions.
• Asian VCs often have the “small-town problem solver” mentality, focusing either on beating competitors in returns or at least outperforming BTC (though, given the current market, few are achieving this). Western VCs tend to have a stronger inclination toward idealism and long-termism. In other words, as long as they can logically explain to their LPs why they invested at a certain valuation, their obsession with returns becomes secondary.
• A pure deployment fund demand—after completing one round, quickly raising the next, mainly to collect management fees.

The exact reason is unclear, so I’ve arranged to meet with several European and American VCs’ Partners and Researchers in the coming weeks. Aside from discussing the market, I want to ask them directly about this question and, once I collect the information, I will update on Twi.

Now, let’s return to the topic of “low-hanging fruit”—this is also an opportunity to discuss where Crypto is headed in the future.

First of all, whether personally or at ABCDE, our long-term bullish belief in Crypto has never wavered. This could even be considered a kind of “faith,” otherwise, we wouldn’t be working full-time in this field. But in the short-to-medium term, we are indeed at a crossroads, a crossroads that I am unsure is similar to the one before the 2019 DeFi Summer. Therefore, I’m sharing this with you all for discussion.

The origin of this thought comes from listening to the Alliance DAO podcast recently, where three points made by the hosts resonated with me deeply.

• Qiao said that his current feeling is similar to that of 2019. He doesn’t know what the next step for Crypto will be, until the 2020 DeFi Summer arrived and gave him clarity and a sense of direction.
• They believe that, over the years, Crypto has only found one Product-Market Fit (PMF), which is finance. To be more specific, it’s trading (Dex, Cex, Perp), lending, stablecoins, and Minting (asset issuance, e.g., Pumpfun).
• They’ve given many suggestions to AI x Crypto startups. If a project’s Crypto elements are too forced, they suggest removing Crypto and focusing purely on AI. As a result, 30% of the projects actually removed Crypto and became purely Web2 projects.

Regarding point 1, I entered the space in 2019, but at that time, I was merely speculating on coins. Honestly, I’m not sure whether VCs at that time had the same sense of “boredom” as we do now, but I recall that at least IEOs were booming, EOS was exploring new directions, and Starkware introduced the ZK concept. Many of the projects from the 2020 DeFi Summer were probably founded and funded in 2018-2019. In theory, the primary market’s feel should have been better than now. In other words, the level of belief in the “big things are coming” should have been higher back then than it is now.

Regarding point 2, it is a response to point 1, and my biggest concern for the short-to-medium term—is it possible that we’ve reached a crossroads, where the low-hanging fruit has largely been picked, and it is different from the crossroads of 2019?

If the biggest PMF for Crypto in terms of utility is finance, then after the DeFi Summer and the subsequent years of micro-innovation, we’ve probably already reached a boundary.

On the opposite side of utility, Crypto is also skilled in narrative, with memes being the most prominent example. Pump.FUN also pushed this narrative to a boundary in 2024.

Then, in the past few years, when both utility and narrative were uncertain about what to do, we at least had Infra to innovate. From ETH to EOS to Solana, and then to Aptos and Sui… I’m wondering, with Solana’s Firedancer and Monad and MegaETH likely launching their mainnets this year, have we also reached a boundary in blockchain Infra expansion?

Regarding point 3, at this crossroads, with all three paths having reached their boundaries, is it possible that only the last path remains—i.e., “modularization of blockchain,” which aligns with the third point mentioned? I’ve heard similar insights on YC’s podcast.

By modularization, I don’t mean Celestia’s modularization, but rather abstracting blockchain technology as a module, inserting it into a startup as a feature, similar to how AI is used.

Most of the Crypto projects we see now are entirely based on Crypto or are Crypto-for-Crypto’s sake, rather than solving a real-world problem. In a positive light, they’re Crypto-native, but in a negative light, they don’t go beyond the circle and just enjoy self-indulgence.

Web2 AI venture capital might also face a similar issue, where many projects appear to be “AI for AI’s sake,” rather than solving a real-world problem.

Will the primary market in the future see some kind of Web2 and Web3 fusion, or encounter each other? A project must exist to solve a real-world problem. If solving that problem requires Crypto, then the Crypto elements will be added; if AI is required, AI elements will be incorporated. But the original intent and purpose of the project are completely unrelated to Crypto and AI. Just like how Meituan’s delivery service uses 5G, platform software, big data, AI task allocation… but at its core, it’s a project born to solve the problem of food delivery.

If the next big stage for Crypto is in this form, will people find it boring? Can the current form of Crypto VC, exchanges, studios, and other Crypto-native industry chains continue?

Currently, more and more projects in the primary market are related to Payment and RWA, which aligns somewhat with the third idea. I’ve recently researched Ondo’s Global Market and discussed several RWA projects. I’ll talk more about the new direction of the RWA track in the next article.

Original Link: Lao Bai’s X