Major Investor: Reality is Below Crypto Hype But We’ll Keep Investing

Tim Alper
Last updated: | 3 min read

The co-founder and managing partner of venture capital giant Union Square Ventures (USV), Fred Wilson, says his company will continue to invest in the crypto industry despite “it is easy to be bearish on crypto right now” and “the reality is well below the hype and challenges abound.” He also highlighted Asia as a possible new center of gravity for cryptocurrency – but issued a word of warning about crypto “risks and setbacks.”

Fred Wilson. Source: a video screenshot, YouTube, Yext

Wilson stated, in a blog post,

“I am long crypto and USV is long crypto. And we are putting more capital into the sector and will continue to do so. But it is not without risks and setbacks. Actually it is full of them.”

Wilson is not the only major investor bullish on crypto. As reported, Elwood Asset Management, owned by billionaire investor Alan Howard, is building a new crypto investment platform for institutional investors as they see it as a “very big growth opportunity” and hope that the platform could eventually manage over USD 1 billion of assets.

Wilson also opined, on the subject of Asia,

“Regulators and banks in many parts of the world are downright hostile to crypto and have pushed much of the liquidity to Asia and the innovation has followed it there. Many of the most interesting things in crypto right now have emanated from Asia.”

Wilson’s comments about the Asian market reflect the fact that in recent months, a number of tech giants, major financial companies, e-commerce platforms and telecoms operators in China, Japan and South Korea have unveiled major blockchain or cryptocurrency projects.

USV’s portfolio of cryptocurrency-related companies includes Coinbase, Blockstack, Dapper Labs and Helium.

However, Wilson offered plenty of crypto-warnings in the same post. Although he stated that he was “optimistic” that many cryptocurrency-related “disappointments will be overcome in the next few years,” he remarked that “crypto has not gone mainstream.”

He wrote, “Very few people earn in crypto. Very few spend in crypto. Very few use dapps [decentralized apps]. Very few do anything with crypto other than buy, sell, and mostly hold.”

(Meanwhile, in a recent interview with The Australian Financial Review, Jack Dorsey, CEO of Twitter, said that Bitcoin “is not functional as a currency”: “The peaks and troughs are like an investment asset and are equivalent to gold.”)

Although Wilson spoke in more glowing terms about Bitcoin, he claimed that Ethereum “confounds” him, remarking, “It remains hard to build on, scaling issues abound, and many developers are looking elsewhere.”

Last month, another USV partner, Albert Wenger, claimed that Ethereum was in danger of becoming “the AOL of crypto.” Wenger wrote, in a post on his own blog,

“It is possible […] that the new financial system […] is a giant house of cards where both the financing and the problems being solved all relate back to the same source, namely Ethereum.”

Meanwhile, in a recent interview on the 80,000 Hours podcast, Vitalik Buterin, co-founder of Ethereum, said that despite the fact that there has been very little actual deployment of blockchain applications outside of cryptocurrency so far, he thinks that it is already starting to change. Buterin hopes that the Ethereum 2.0 upgrade, estimated to happen in 2020, will solve scalability issues and “provide enough capacity that people can actually run a lot of interesting things on [Ethereum].” Also, he said he’s “very confident” that some of the technical problems that Ethereum is facing will be solved after the network changes its current proof-of-work consensus mechanism to proof-of-stake.
Watch Fred Wilson and Tushar Jain (Multicoin Capital) discussing how to construct a portfolio of crypto assets:
(December 2018)