Author: Sharon, Lucy, Jaleel, Joyce, BlockBeats

Editor: Jack, BlockBeats

Since the second quarter of this year, the cryptocurrency market has entered a deep bear market, and the investment strategies and scale of major VCs have been shrinking. According to incomplete statistics from BlockBeats, in the past few months, the number of weekly financing in the cryptocurrency field has remained at around 10 transactions, while last year, this data was still around 30 transactions per week, and even as high as 60 transactions per week.

However, at the end of the third quarter, some first-tier crypto VCs became active again. For example, a16z led four crypto projects in the past week with a total financing amount of $76.6 million. It seems that the "a16z team" has started their bargain-hunting in the crypto industry.

What has happened in the cryptocurrency market in the past six months without the "a16z" players?

As a leading player in the industry, a16z is no exception. According to BlockBeats' incomplete statistics, in 2022, a16z participated in a total of 58 investments in the cryptocurrency field, with the highest total financing amount in March 2022, exceeding 2.1 billion US dollars. At the same time, the highest investment led by a16z in 2022 was given to Yuga Labs, with an amount of 450 million US dollars.

However, after entering 2023, its investment frequency and amount showed a downward trend. In the first quarter of 2023, a16z completed 13 investments, and the total amount of financing for the projects it participated in decreased by 86.7% compared to the same period last year. The highest amount of lead investment was $150 million, given to the AI startup Character.AI. The highest lead investment amount decreased from $450 million in 2022 to $150 million in 2023. The degree of contraction can be seen.

By the second quarter, a16z entered a relatively quiet period. From April to August, a16z only completed four lead investments, including a $29.3 million seed round for Story Protocol, a blockchain-based IP infrastructure, a $43 million Series A round for Gensyn, a blockchain-based AI computing protocol, a $20 million Series A round for Socket, an open-source software security solution, and a $16.5 million seed round for Ideogram AI, a generative AI tool.

During the second quarter of the past, the crypto VC industry experienced a "withdrawal wave". In addition to a16z, Paradigm also modified its official website information at the end of May, stating that it is a "research-driven technology investment company" rather than a company specializing in investing in "disruptive crypto/Web3 companies and protocols", indicating a possible exit from the crypto industry.

Industry organizations with the attribute of "spiritual leader" have gradually faded out of the market, and the industry has gradually entered a chaotic stage of memes and rampant speculation.

In March, Arbitrum's airdrop briefly opened a grand and prosperous wealth-making movement in the cryptocurrency industry. Legendary stories of "creating thousands of accounts," "receiving hundreds of thousands of tokens," and "becoming free overnight" have once again become popular. The community has suddenly entered an era of mass speculation, with the daily active users of zkSync and StarkNet increasing by more than 10 times.

After a brief end to the era of fur lashing, BRC20 took over. In May, the BRC20 token Ordi broke through $10 and its market value exceeded $200 million, creating a FOMO atmosphere in various communities. Compared to emptying airdrops, the wealth effect of BRC20 tokens seems to be easier. Users do not need to participate in on-chain operations, nor do they need to worry about not meeting strict conditions. They only need to mint the tokens at the time of issuance, and even in the early days of the Bitcoin chain when it was not congested, they only need to pay a few U's worth of gas fees to obtain a large number of Ordi tokens.

In the era of BRC20, Meme is also not to be outdone and takes turns to enter the market. A Meme token named PEPE quietly went online and rose thousands of times in just four days. The myth of getting rich overnight has made PEPE famous, and the successive surges of PEPE have once again brought Meme coins and Dogecoin to the forefront of the cryptocurrency market. In just a few days, dozens of Meme coins have emerged, with gains of tens of times, causing half of the market to revel in the myth of wealth creation, while the other half continues to be anxious about Fomo.

Returning to the recent popular public chain, Base. Without relying on "Odyssey" or airdrops to create hype, Coinbase's Layer2 network Base, solely based on the meme myth BALD with a thousand-fold increase, has attracted countless attention and achieved a 2000-fold increase in about 14 hours.

However, just over 3 hours later, BALD revealed its fangs and destroyed everything. The project team suddenly withdrew a total of 8660 ETH and 179 million BALD liquidity within 7 minutes, achieving RUG. Interestingly, some on-chain detectives believe that SBF or the mastermind behind BALD is responsible.

"Leading Investment Sheep" is coming to buy the dip?

On the other side of chaos, some people are leaving quietly. Since the beginning of this year, multiple projects have announced dissolution and shutdown, and the speed of project shutdowns is increasing, from an average of one project per month to an average of five projects per month. In September alone, four projects announced shutdowns, including NFT platform Voice, DeFi project Gro Protocol, DeFi project Fuji Finance, and DeFi and NFT trading robot None Trading. Most of these projects have come to an end due to "insufficient funds".

Related reading: "Multiple projects announce shutdowns in succession, is the cryptocurrency industry facing a "shutdown wave"?"

Regarding the reason for "insufficient funds", perhaps it can be seen from an article published last week by Jocy, founder of IOSG, one of China's largest cryptocurrency venture capital firms. After the TOKEN 2049 conference, Jocy wrote that the cold brought by the bear market may make many project parties unable to survive this winter, and also pointed out that current cryptocurrency investment institutions are more inclined to tighten their belts.

"For many teams, this 2049 is basically their last hope for financing. If the bear market does not end, this may be their team's last brand exposure, because most early teams have expanded in the past two years, and their runway has basically bottomed out. The burn rate of some teams is very high."

However, in sharp contrast to the pessimistic views of Jocy, the lively scene of the return of the Western encryption investment institution "Leading Sheep" to the market is evident.

Following the change of its official website homepage to "research-driven technology investment company" in May, removing any content related to cryptocurrency, Paradigm has reversed this decision just over a month later and announced its return to the cryptocurrency field. Matt Huang, co-founder of Paradigm, stated that the previous removal of all mentions of cryptocurrency from the website login page was "a bit absurd and a mistake". He also emphasized that Paradigm will not give up its investment in cryptocurrency.

After returning to the encryption industry, Paradigm immediately entered the "most exciting" MEV market and participated in Flashbots' $60 million Series B financing completed in July, which increased its valuation by over $1 billion. In addition to Flashbots, what is even more impressive about Paradigm in the past few months is its selection and investment in friend.tech, which has led to the rapid rise of the Web3 social newcomer with a market value of over $100 million in just two months.

Aside from investments, the Paradigm official blog has also become exceptionally active. In July, Paradigm released a "Collaborate with Paradigm" announcement, stating that they hope to collaborate with more outstanding talents in the cryptocurrency field, and calling on entrepreneurs or projects in the seed or Series A funding stage to fill out a form to introduce their projects to Paradigm.

Yesterday, Matt Huang published another long article, not only refuting the pessimistic view that the current Crypto market is too speculative and developing slowly from another perspective, but also expressing confidence in the future of Crypto.

Recommended reading: "Paradigm Founder: Cryptocurrency, a New Planet Being Colonized".

With the high-profile return of Paradigm, a16z has also regained its vitality.

From the chart below, it can be seen that from April to July this year, the entire Q2 of a16z seemed to have quieted down, with an average of 1 investment per month. However, starting from August, a16z seemed to have become active again, with 2 investments in August increasing to 5 investments in September, equivalent to the total of the past few months. Moreover, in the latter half of September alone, a16z made 4 consecutive investments within 10 days.

On September 12th, a16z led a $15 million Series A funding round for Pahdo Labs, a development studio for the metaverse platform. On the 18th, a16z led a $25 million seed funding round for Bastion, a startup providing cryptocurrency custody services. On the 20th, a16z led a $3.6 million seed funding round for Freatic, a decentralized information market protocol, and the following day, led a $33 million seed funding round for Proof of Play, a blockchain gaming startup.

Amid the market conditions where multiple project parties have successively shut down and Eastern Capital is in a tight spot, are "a16z" making high-profile appearances and frequent moves to bottom-fish in the cryptocurrency industry?

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia