As the founder of a blockchain venture fund, I can admit that the past few years have been brutal for the crypto industry. Still, I arrived in Singapore for Token2049 hopeful. I’ve watched projects raise at massive valuations over the past year. As they prepare to launch finally, I was optimistic that the next bull cycle might be right around the corner.
Asia represents a crucial step for crypto companies. It’s where they meet the exchanges, market makers, liquidity providers, and traders that will help bring life to their tokens. So Singapore was our chance to assess the viability of all the projects preparing to come to market. Do they have real communities, builders, usability—and demand—backing them?
I immediately questioned those expectations. I checked into my hotel, where rooms can cost upwards of $700 even if you book several months in advance, only to be greeted by community managers of various projects in their early twenties staying down the hall from me. This was before the conference even started, and they were already throwing multi-thousand-dollar dinner parties by the pool. And that was just the beginning. Every night, I saw parties that must have cost hundreds of thousands of dollars, with the types of DJs flown in that you usually only see at Coachella or in Ibiza.
At this point, you might be asking—well that’s just crypto, right? And yes, the last bull cycle in 2021 was dominated by massive, flashy parties, many thrown by my fellow VCs. But there was real interest from retail investors and plenty of capital sloshing around for us to believe that it was normal. That’s not true now, and investors aren’t the ones throwing the parties. Most of the projects and VCs themselves are struggling to raise, with some of the top VCs slashing their fund target. So where is the money coming from?
The answer is clear: The money is coming from VCs, who are pumping funding into new layer 1 and layer 2 blockchains that have yet to even launch a testnet, but are still raising at billion-plus dollar valuations. And clearly, a large portion of that funding is going to so-called marketing expenses, which are really just giant parties.
That would all be fine if you could prove there was some kind of return on investment—like brand parties for consumer goods—but I have yet to see any evidence that a crazy party in a discotheque results in any kind of ROI.
The videos posted on X of events with lines stretching across floors certainly create a feeling of, “I want to check out this project.” But do I want to build on that project based on the party? This is an artificial boom economy built on top of VC money.
The future of crypto
Now, I know you’re not going to spill any tears over venture money being wasted. But if you care about the future of the crypto industry, there are real consequences. Crypto projects raise money through tokens, which means to keep their astronomic valuations, their token launches have to sustain a certain price floor. We’ve seen the opposite with all the high-profile token launches of the past year, from Wormhole to Celestia to Etherfi to Avail, which have plummeted in value.
Yes, venture funding is rebounding, and projects are raising at huge valuations again. But everyone knows that it’s a bubble. It’s the first time since crypto began that we have multibillion-dollar VCs who have too much money to deploy. Pumping money into their own projects at higher value is good for them to have higher unrealized valuations, all so they can raise more funds without really paying anything back to their investors. VCs lost any accountability from their projects when they started making token investments because there is no board or any financial transparency requirements.
The silver lining is that many credible VCs have started to lose their patience. Nobody is celebrating 22-year-old kids raising millions of dollars and then just throwing parties instead of hosting builder days.
Back in 2017, this was a new space. We had a lot of young founders, and I thought that we were going to find maturity. But this year is the first time where I’ve started to feel like we’re not going to reach that moment. When I speak with the exchanges and the liquidity players, they realize that retail investors are not coming on the hype of parties alone and that valuations are too high for everyday customers to sustain and make any profit.
Now should be a time of introspection for every VC in the crypto space as we move toward the expected bull cycle. Let’s not gloat about pumping up an unrealized valuation. We need sustainability if we want family offices, high-net-worth individuals, and retail customers to continue to believe in our world.
Kavita Gupta is the founder and managing partner of Delta Blockchain Fund. You can follow her at @kavitagupta19 .
This story was originally featured on Fortune.com
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