Market and Some Thoughts from Eastern and Western First-Perspective Views
Author: Lao Bai, Research Partner at ABCDE Capital and Advisor to Amber Group
It seems that this is the longest period of silence for Twi. The reason is simple: as a blogger who never accepts advertisements, each time I write, it essentially needs a drive from the desire to express. However, the market in the past few months has made it hard to feel this drive. While the secondary market’s sluggish performance certainly accounts for a significant part of it, it is probably the feeling from the primary market that causes this lack of expression.
However, recently I’ve observed some phenomena and had some thoughts. It may take a while, so I plan to split it into three or four posts. The main topics will be “The Market from Eastern and Western VC’s First-Perspective View,” “New Signs of RWA,” and “Some Things Worth Mentioning About ETH and Solana.”
Let’s talk about the first topic today.
In the past few weeks, I’ve had discussions with some of my counterparts in Asia and found that, without exception, they’ve all entered a “pause” or “conservative” investment mode. Our most recent investment was in January, and similar stories were shared by others. Cases where they have refrained from investing for two or three months, or even longer, are quite common. As for the market sentiment, the word “boring” might be the most fitting description, or rather the temporary “consensus” we share.
This feeling of boredom is not entirely linked to the secondary market. I clearly remember that after the Luna collapse, despite the secondary market being sluggish, there was still excitement when discussing promising expansion projects in the primary market, such as ZK or innovative projects in DeFi, GameFi, and AI. However, after entering 2025, this excitement has gradually faded. The secondary market’s indifference to any narrative fades after just a few days, which naturally affects the primary market’s mood. But a bigger concern is whether we have reached the stage where “low-hanging fruit” has mostly been picked, leading to a prolonged period of adjustment, exploration, transformation, and intense pain during the window period. I’ll elaborate on this at the end, because the current situation in Western VC differs somewhat from that in the East.
The catalyst for this is a DeFi project we invested in during the Pre-seed round last year, which is now raising its Seed round. Originally, I thought that given the current primary and secondary markets, I would be satisfied if they could raise enough. However, they ended up oversubscribed by several million dollars, with multiple European and American VCs eager to invest. This outcome caught me by surprise. The project itself is good but not of S-tier quality. So, why is it that while we in Asia are “dormant,” Europe and the U.S. are still actively investing? What makes them confident to pull the trigger at this valuation?
We discussed this internally and made some speculative guesses, such as:
- The timing of the founding of European and American VCs differs from that of Asian ones, leading to different exit cycles, which in turn leads to different investment decisions.
- Asian VCs tend to have the mindset of “small-town problem solvers” – focusing on competing with peers for better returns or at least beating BTC (though in the current market, few can achieve this). In contrast, European and American counterparts are more focused on idealism and long-termism. Or, as long as they can logically explain to LPs why they invested at this valuation, their obsession with returns is secondary.
- There is a pure fund deployment need – once they complete one round, they hurry to raise the next, with management fees as the main focus.
The exact reasons are unclear for now, but we can only speculate. So, I’ve arranged to meet with a few European and American VC partners and researchers in the next few weeks. Besides discussing their views on the market, I also plan to ask them directly about this issue. Once I’ve gathered the information, I’ll update you all on Twi.
Now, let’s go back and discuss the idea of low-hanging fruit, as I’d like to take this opportunity to discuss the future of Crypto with everyone.
First of all, both personally and as ABCDE, our belief in the long-term bullish outlook for Crypto has never wavered. This could even be considered a kind of “faith.” Otherwise, we wouldn’t have chosen to work full-time in this field. However, in the medium to short-term, we do find ourselves at a crossroads, one that I’m not sure resembles the crossroads we faced before the 2019 DeFi Summer. Therefore, I’m sharing this here for discussion.
The origin of this thinking came from listening to Alliance DAO’s podcast recently, where three viewpoints really resonated with me:
- Qiao mentioned that his current feeling is similar to 2019 – he doesn’t know what the next step for Crypto will be until the 2020 DeFi Summer came along and gave him a clear direction.
- They believe that over the years, Crypto has only found one product-market fit (PMF), which is finance, and more specifically, trading (Dex, Cex, Perp), lending, stablecoins, and Mint (asset issuance, e.g., Pumpfun).
- They also gave advice to several AI x Crypto startups, suggesting that if the crypto element in the project was too forced, it might be better to remove it entirely and just do pure AI. As a result, 30% of the projects indeed removed Crypto and became pure Web2 projects.
Regarding the first point, although I entered the field in 2019, I was simply trading coins at that time. Honestly, I’m not sure if VCs back then had the same sense of “boredom” that we feel now. But from what I remember, IEOs were still popular, EOS was exploring directions, Starkware introduced the ZK concept, and many DeFi Summer projects in 2020 were likely founded and funded in 2018-2019. So, theoretically, the primary market sentiment should have been better back then. In other words, the belief in “something big is coming” should have been stronger than it is now.
Regarding the second point, it echoes the first and represents my biggest concern in the short to medium term – have we reached a crossroads where the low-hanging fruit has mostly been picked, different from 2019?
If Crypto’s biggest PMF in terms of utility is finance, then the DeFi Summer and the subsequent years of incremental innovation have essentially reached a boundary today.
On the flip side of utility, which is also Crypto’s forte, the narrative direction, Meme is undoubtedly the best representation, and Pump.FUN took this direction to the limit in 2024.
Furthermore, in the past few years, when both utility and narrative were uncertain, our community could at least still focus on Infra. From ETH to EOS to Solana, and now Aptos and Sui… I’m wondering, with Solana’s Firedancer, Monad, and MegaETH likely launching on mainnet this year, have we reached the boundary in blockchain infrastructure expansion?
Regarding the third point, if we’ve reached the boundary of all three paths at this crossroads, does it mean the last path left is “modularization of blockchain”? This concept is related to the third point above, and I heard similar insights in YC’s podcast.
By “modularization” here, I don’t mean the kind of modularization that Celestia advocates, but abstracting the entire blockchain technology into a module that can be inserted as a function into a startup, much like AI.
Most Crypto projects we see today are entirely Crypto-based, or in other words, Crypto for the sake of Crypto, not necessarily solving a real-world problem. This can be described as “Crypto Native.” On the other hand, Web2 AI venture circles might face a similar issue, where many projects appear to be “AI for the sake of AI” rather than solving a specific real-world problem.
Will the future primary market witness a fusion or intersection of Web2 and Web3? A project should exist to solve a real-world problem, and in the process of solving it, if Crypto is necessary, it should incorporate Crypto elements, and if AI is needed, it should integrate AI elements. But the core purpose and goal should not be directly related to Crypto or AI, just as Meituan uses 5G, platform software, big data, and AI task distribution to solve the problem of food delivery.
If the next big phase for Crypto takes this form, will people find it boring? Can the current Crypto-native industries, such as Crypto VCs, exchanges, and studios, continue?
At present, the increasing number of primary market projects related to Payment and RWA somewhat aligns with this idea. I’ve recently studied Ondo’s Global Market and discussed several RWA projects. The next post will focus on the new directions in the RWA space.