Pantera CEO calls 2023 ‘best time ever’ to start a crypto company with $121B VC funding available

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Cryp­to invest­ment firm Pan­tera Cap­i­tal released a ‘Year Ahead’ let­ter to investors on Jan. 23, in which it dis­closed data show­cas­ing the blockchain industry’s resilient nature.

CEO of Pan­tera Cap­i­tal, Dan More­head, shared an overview of the company’s out­look on 2023 in which he stated;

“Blockchain’s resilience in the face of a ter­ri­ble macro mar­ket for risk assets and his­toric idio­syn­crat­ic dis­as­ters is impressive.”

In com­par­i­son to the biggest com­pa­nies in the tech indus­try, Bit­coin has out­per­formed Tes­la, Meta, and Pay­Pal over the past 12 months. Pantera’s data, how­ev­er, cut off on Jan. 17, mean­ing that it does not account for the con­tin­ued ral­ly in Bitcoin’s price. As of press time, Bit­coin is now down 48%, putting it ahead of Square on the below chart.

tech performance vs bitcoin
Source: Pan­tera Capital

In the let­ter to investors, More­head stat­ed that he was not sur­prised that Bit­coin had per­formed so well, cit­ing his expe­ri­ence of three pre­vi­ous bear mar­kets. Fur­ther, he revealed that he believes the bot­tom of the mar­ket has already been and gone.

“I believe that it has already bot­tomed and we will see blockchain assets con­tin­ue their 13-year 2.3x per year appre­ci­a­tion trend soon.”

The resilience of DeFi over CeFi

Joey Krug, the CO-CIO of Pan­tera, shared his out­look for 2023 in the let­ter, call­ing 2022 “prob­a­bly the biggest year of upheaval in cryp­to his­to­ry.” Com­par­ing 2022 with 2014, Krug com­pared the cryp­to projects that failed last year to those that col­lapsed fol­low­ing the first Bit­coin halv­ing. Specif­i­cal­ly, Krug remarked, “many projects and com­pa­nies that exem­pli­fied the antithe­sis of crypto’s fun­da­men­tal prin­ci­ples blew up.”

Krug went on to iden­ti­fy a core issue with­in many ‘cryp­to’ com­pa­nies that have thrived in recent years. Cryp­to is built on per­mis­sion­less tech­nol­o­gy and was always designed to remove the need for trust. How­ev­er, many com­pa­nies that failed in 2022 required users to trust them – a trust that seems to have been exploited.

“Actu­al cryp­to — like on-chain, smart con­tract, pro­to­col-based cryp­to — real­ly mit­i­gates these prob­lems because you don’t need to hand all your mon­ey over to one enti­ty that claims, trust us.”

Fur­ther, Krug took a shot at those who argue against the rel­e­van­cy of smart con­tracts and the issues of ‘risky’ DeFi lend­ing. Assured­ly, he point­ed out that “it’s not the com­put­er program’s fault if your loan doesn’t get paid back” due to a poor­ly designed smart contract.

Amid fail­ing cen­tral­ized exchanges, Kurg not­ed that decen­tral­ized exchanges that were involved in lend­ing to “large­ly unknown coun­ter­par­ties didn’t blow up.” In an indus­try that has been heav­i­ly test­ed through­out the past 12 months, it was CeFi that “blew up,” not DeFi. The com­pa­nies uti­liz­ing blockchain tech­nol­o­gy to secure their lend­ing activ­i­ties con­tin­ued oper­at­ing while FTX, Voy­ager, Block­Fi, and Cel­sius failed.

Krug attrib­uted DeFi’s suc­cess to its trust­less nature and more resilient risk man­age­ment system.

In 2023 Krug not­ed that “despite low­er prices, I think the space is clear­ly in a much bet­ter posi­tion than ever.” The improve­ment in the under­ly­ing infra­struc­ture and devel­op­er tools was praised by Pantera’s CO-CIO, who believes the world’s finan­cial sys­tems will even­tu­al­ly all be built on blockchain rails.

“The aver­age per­son will have apps on their phone that give them access to DeFi, where they’ll be able to engage in finan­cial trans­ac­tions with­out banks/brokers, with low­er fees, glob­al liq­uid­i­ty, and mar­kets oper­at­ing 24/7.”

Work through­out 2023 and beyond should focus on mak­ing DeFi as easy as pos­si­ble and increas­ing liq­uid­i­ty in the ecosys­tem. Krug high­light­ed that these issues will “take anoth­er two to three years to be solved.” There­fore, his out­look for 2023 is that it will be a time to build.

Blockchain sector breakdown

Paul Vera­dit­tak­it, a Gen­er­al Part­ner at Pan­tera Cap­i­tal, also sum­ma­rized his views with a break­down of cru­cial 2022 met­rics. The chart below shows the lev­el of invest­ment across the cryp­to indus­try, reveal­ing DeFi and Gam­ing as the sec­tors with the most sig­nif­i­cant deal count.

deal sectors
Source: Pan­tera Capital

Pan­tera is high­ly bull­ish on the cryp­to space in 2023; it not­ed, “we believe this is a tremen­dous time to start a com­pa­ny in the blockchain space.” Fur­ther, the let­ter revealed $121 bil­lion that was raised in the first half of 2022 is now await­ing deploy­ment to the cryp­to sector.

The full let­ter includes a detailed review of 2022 and can be found on Pantera’s website.

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