VCs Learned Bitcoin & ICO Lesson The Hard Way - Marc van der Chijs
Many venture capitalists (VCs) learned the hard way that just hodling bitcoin (BTC) would have been a better strategy than trying to outperform it, Marc van der Chijs, entrepreneur, crypto-focused venture capitalist, said in an interview with Cryptonews.com. However, according to him, while "bitcoin will be the main player in the crypto space for a long time to come," there is also value in some other tokens and blockchains.
The co-founder of VC firm First Block Capital (FBC) said that this company is now fully invested and they think that they are well-positioned for the upcoming bull run and don't want to sell any of their holdings. However, he said that there are "more and more good projects" he would love to invest in, and he’s primarily looking at projects that combine blockchain and artificial intelligence (AI), as well as projects in the digital identity space.
Upon starting FBC, the team’s focus was on setting up new businesses in the crypto space and investing the company’s capital in them. But after the bull run ended, they mainly invested in cryptocurrencies, mostly BTC, and in some smaller startups like Aquanow. Furthermore, the company also did work on tokenizing assets (mainly real estate) and securities, soon coming to realize that it's too early.
"Until a fully regulated tier one security token exchange will be launched and operate successfully it is better to stay on the sideline," van der Chijs said.
Slow bulls, fast bulls
Meanwhile, as Bitcoiners hope that recent US-based software firm MicroStrategy’s and payments company Square’s investments in BTC might encourage other companies to do the same, the investor warned that this is a slow process. But it might be accelerated by a bull run, and in turn, the higher entry of public companies into this space will push BTC upwards.
"If MicroStrategy's investment is suddenly worth a few billion, a lot more companies will start investing single-digit percentages in bitcoin, but most might not announce it right away. It will lead to an acceleration in the bitcoin price, especially in a bull run when not many people are willing to sell," van der Chijs said.
Also, while there is a lot of Fear Of Missing Out (FOMO) in the space, especially from people new to crypto, which leads to many of them making investments with no real research, chasing the next Bitcoin, the entrepreneur suggested looking back at the history.
The initial coin offering (ICO) boom and bust was a particularly painful one for many VCs, after which many have left the space or are not actively investing anymore, the venture capitalist said. Boom and bust cycles follow each other with higher booms at every cycle. Those who have a long time horizon don't need to time the market by trading actively, while those with a short one can make "a lot more money" by trading - however, "bitcoin is so volatile one mistake can cost you everything, especially if you use leverage."
Knowing what you're doing is a must if you want to deploy capital in, let's say decentralized finance (DeFi), and "the 'older' VCs seem to be missing the boat on that one."
"I, therefore, expect a trend of VC funds with [general partners] that are much younger than traditional VCs, they will dominate the crypto investment space," according to the entrepreneur, who also co-founded publicly traded Bitcoin miner Hut 8 Mining.
"Generally I believe mining companies will outperform bitcoin once the bull market returns, and that's also why I believe large funds like Fidelity are now taking larger positions in the space," the Dutch entrepreneur and investor based in Vancouver told Cryptonews.com.
As for the mining space itself, "an ongoing consolidation" seems to be on the horizon, "which means that mining will be more centralized," said the entrepreneur. "The hash rate keeps going up so economies of scale are more important, and only the biggest players can get the lowest electricity costs for their operations," he added. Chips will keep improving over time, but the increase in speed and performance will be much smaller than before - this means that the latest generation of chips will have a longer lifetime than past generations, which is good for miners.
According to him, while they set up Hut 8 Mining some 3 years ago, and while they still hold shares and follow the company closely, co-founder and CEO Andrew Kiguel left it in the second quarter of this year, so van der Chijs can't comment on the company's strategy anymore. He did say, though, that he believes Hut 8 will always focus on Bitcoin only, "so you won't see a switch mining Ethereum (ETH) or other coins."
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