Since the crypto market entered a deep bear market in the second quarter of this year, the investment strategies and scales of major VCs have been shrinking. According to incomplete statistics from BlockBeats, the number of financings in the crypto field has remained at around 10 per week in the past few months, while last year, this number remained at around 30 per week, with the highest number even reaching 60 per week.

But at the end of the third quarter, some first-tier crypto VCs became active again. Take a16z as an example. In the past week or so, it has led the investment in four crypto projects, with a total project financing of US$76.6 million. The bottom-fishing action of "a16z" in the crypto industry seems to have begun.

What has the crypto market experienced in the past six months without "a16z"?

The same is true for a16z, the industry leader. According to incomplete statistics from BlockBeats, in 2022, a16z participated in a total of 58 investments in the crypto field, of which the total financing amount of the investment projects in March 2022 was the highest, exceeding US$2.1 billion. At the same time, the largest investment led by a16z in 2022 was given to Yuga Labs, with an amount of US$450 million.

But 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 financing amount of the projects in which it participated decreased by 86.7% year-on-year. The highest amount of its lead investment was US$150 million, which was given to the AI ​​startup Character.AI. The highest lead investment amount dropped from 450 million in 2022 to 150 million in 2023. The degree of contraction can be imagined.

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

In the second quarter of the past, crypto VCs have experienced a "tide of withdrawal". In addition to a16z, Paradigm also modified its official website information at the end of May, calling itself a "research-driven technology investment company" rather than a company that specializes in investing in "disruptive crypto/Web3 companies and protocols", which seems to indicate that it intends to withdraw from crypto.

Institutions with the attributes of "spiritual leaders" in the industry have gradually faded out of the market, and the industry has gradually entered a chaotic stage with memes and local dogs running rampant, just like a headless fly.

In March, Arbitrum’s airdrop launched a short but impressive wealth creation movement in the cryptocurrency community. The legendary stories of “swiping thousands of accounts”, “getting hundreds of thousands of tokens” and “freedom overnight” were once again widely circulated. The community instantly ushered in an era of universal coin-grabbing, and the number of daily active users of zkSync and StarkNet increased by more than 10 times.

After a brief era of arbitrage ended, the BRC20 season took over. In May, the price of BRC20 token Ordi exceeded $10, and the market value exceeded $200 million, forming a FOMO atmosphere in various communities. Compared with airdrops, the wealth-making effect of BRC20 tokens seems to be easier. Users do not need to participate in the internal circulation of on-chain operations, nor do they need to worry about not being able to meet the harsh conditions. They only need to mint the tokens as soon as they are issued. Even in the early days when the Bitcoin chain was not congested, they only needed to pay a few U of gas fees in the early stage of issuance to obtain a large number of Ordi tokens.

In the BRC20 era, Meme also took turns to appear. The Meme token named PEPE was quietly launched and increased a thousand times in just four days. The myth of getting rich overnight made PEPE famous. The successive surges of PEPE made Meme coin and Dog coin once again take the main stage of the crypto market. In a few days, dozens of Meme coins "followed the trend" and were born, with dozens of times of increase at a time, making half of the market revel in the myth of making wealth, and half of the market continued to be anxious in Fomo.

Let’s go back to the recent popular public chain Base. Without relying on “Odyssey” or airdrops, the Layer2 network Base launched by Coinbase has attracted countless eyeballs with just a meme myth BALD that has increased by 1,000 times, and has increased by 2,000 times in about 14 hours.

But just over 3 hours later, BALD showed its fangs and destroyed everything. The project team suddenly withdrew a total of 8,660 ETH and 179 million BALD liquidity within 7 minutes, realizing RUG. Interestingly, some on-chain detectives believe that SBF may be the leader behind BALD.

Is the “leading investor” here to buy at the bottom?

On the other side of the chaos, some people have left the stage sadly. Since the beginning of this year, many projects have announced their dissolution and closure, and the number of projects that have been shut down has increased faster and faster, from an average of 1 project per month to an average of 5 per month. In September alone, 4 projects were shut down, including the NFT platform Voice, the DeFi project Gro Protocol, the DeFi project Fuji Finance, and the DeFi and NFT trading robot None Trading. Most of these projects came to an end due to "insufficient funds."

Related reading: "Multiple projects have announced their closures one after another. Is the crypto industry facing a "shutdown wave"? "

The reason for "lack of funds" can perhaps be seen from an article published last week by Jocy, the founder of IOSG, one of the largest venture capital institutions in the crypto industry in China. After the TOKEN 2049 conference, Jocy pointed out in an article that the cold weather brought by the bear market may prevent many project parties from surviving this winter, and also pointed out that current crypto industry investment institutions are more inclined to tighten their belts.

“For many teams, 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-stage teams have basically reached the bottom of their runway due to their expansion in the past two years, and some teams’ burn rate is very high.”

But in sharp contrast to Jocy's pessimistic tone, the "leading investors" from Western crypto investment institutions have returned to the lively market.

In May, Paradigm changed the description of its official website homepage to "research-driven technology investment company" and deleted any content related to cryptocurrency. Just over a month later, Paradigm reversed the change and announced its return to the cryptocurrency field. Paradigm co-founder Matt Huang said that the deletion of all references to cryptocurrency from its website login page was "a bit ridiculous and a mistake." He also emphasized that Paradigm will not give up investing in cryptocurrency.

After returning to the crypto industry, Paradigm immediately entered the "most competitive" MEV market and participated in Flashbots' $60 million Series B financing in July, increasing its valuation by more than $1 billion. In addition to Flashbots, Paradigm's more impressive investment in friend.tech in the past few months has been the creation of a Web3 social upstart with a market value of more than $100 million in just two months.

In addition to investment, Paradigm's official blog has also become unusually active. In July, Paradigm released the "Collaborate with Paradigm" announcement, saying that it hopes to cooperate with more outstanding talents in the encryption field, and called on entrepreneurs or projects that are already in the seed stage or Series A financing stage to fill out a form to introduce their projects to Paradigm.

Yesterday, Matt Huang published another long article, which not only refuted the current pessimistic argument that Crypto is too speculative and slow to develop from another perspective, but also expressed confidence in the prospects of Crypto.

Recommended reading: "Paradigm founder: Cryptocurrency, a new planet being colonized"

With Paradigm's high-profile return, a16z has also regained its vitality.

As can be seen from the figure below, from April to July this year, a16z seemed to be quiet throughout the second quarter, with an average of 1 investment per month; but starting from August, a16z seemed to be active again, increasing from 2 investments in August to 5 investments in September, which is equivalent to the total of the past few months. In the middle and late September alone, a16z made 4 investments in 10 days.

On September 12, a16z led a $15 million Series A round for Pahdo Labs, a studio developing the Metaverse platform. On the 18th, a16z led a $25 million seed round for Bastion, a startup that provides services such as cryptocurrency custody. On the 20th, a16z led a $3.6 million seed round for Freatic, a decentralized information market protocol, and the next day led a $33 million seed round for Proof of Play, a blockchain gaming startup.

In a market where many projects have ceased operations and Oriental capital is stretched thin, "a16z" are making high-profile appearances and making frequent moves. Are they trying to bottom out the crypto industry?