“The smartest people in the world work on Bitcoin, not on any other project” Mike Jarmusz Bitcoin Magazine said. “They’re not working on altcoins or selling real estate in a metaverse fantasyland. Your medical records don’t go to something else masquerading as a blockchain. We consider these as ridiculous and completely uninvestable ideas.”
Jarmuz is the managing partner of an investment fund called Lightning Ventures, the peculiarity of which is that it focuses its investments only on companies that develop products and services on bitcoin, and no other cryptocurrency.
“The digital economy of the 21st century is built on Bitcoin’s indigenous companies,” he said McShane, a venture partner at Lightning Ventures and an employee at BTC Inc., which runs Bitcoin Magazine. “We invest in the best Bitcoin founders who are focused and deliver differentiated value for humanity. We are determined to return a lot of money to our investors through Bitcoin companies that strive to make a positive impact on the world.”
And Lightning Ventures is not alone, but part of a growing niche of Bitcoin-only venture capitalists (VCs).
The Fall of Crypto Hedge Funds
Last year, at the height of the bull market, it was crypto VCs who dominated the headlines, pouring over $33 billion into crypto/blockchain/Web3 projects and startups. This golden age was short-lived, as this year’s market crash also saw notable casualties in the world of hedge funds: one in particular was Three Arrows Capital, which defaulted last June after defaulting on more than $670 million in loans.
Such booms and busts are rare for a venture capital fund, which traditionally approaches investments with a 10-year time horizon rather than a horizon of just a few months. However, when the bet is on projects that issue tokens out of thin air, at the moment when they are valued in a wave of enthusiasm, the temptation to turn investment activity into speculation is very strong – with the risk of getting burned when the markets change their prices. course.
Prefer less time
Cryptocurrency hedge funds have demonstrated a short-term mentality – the opposite of what VCs who believe in Bitcoin’s long-term success share, investing in companies that are trying to develop services that generate real revenue, rather than releasing useless tokens invented on the spot. value for market.
“An early-stage Bitcoin startup or angel investment is definitely a low-time option,” Jarmuz said. “Many crypto projects choose to issue unlicensed, unregistered securities in exchange for capital, but you don’t end up with quality investors. What happens is that investors dump these “tokens” or equity the minute they can. With Lightning Ventures thesis and only bitcoin investments, we are committed to the life of the company and are not interested in selling ‘tokens’ as soon as we can. When we invest in any company, we support it and we support it throughout its life cycle.”
On the same page Christopher Callicott Trammell Venture Partners, or TVP, said the idea of funding projects that attract customers by creating tokens is not only symptomatic of a short-term view, but also inconsistent with the typical incentives of a venture capital fund.
“Investing in these tokens, Calicott said, is a fundamental misalignment of interest to really grow a company and achieve maximum success. Investors essentially become speculators trying to get out of their positions at the best possible time.”
Moreover, there used to be a feeling that it was difficult to build on Bitcoin – and many moved to other cryptocurrencies – today everything changes:
“Bitcoin is becoming a platform and entrepreneurs are starting to realize that,” Calicott continued: “There is blood in the streets by the crypto industry, but even so, there are more entrepreneurs now than ever who want to build services on top of Bitcoin. We see ourselves as long-term investors. We are a solid we try to make smart bets on companies that we think can create an entirely new global monetary order on top of the standard Bitcoin.
Removal of Outdated System
A new monetary standard, a global store of value, a peer-to-peer payment method that has made the big traditional players obsolete. Whichever way you look at it, Bitcoin presents a vision of the future that completely overturns the paradigms we’re used to: the idea of inflation as necessary for growth, macroeconomic control by states and central banks, the compulsion to trust. management of deposits and digital payments to intermediaries.
Is the old way of seeing things fit for Bitcoin’s future? Not so, according to Ego Death Capital’s website.
“The old system must self-destruct in order for the new system to thrive, bringing abundance, opportunity and affordability,” says the website of the VC firm of which he is the CEO. Jeff Booth, the author of the book “The Price of Tomorrow”. “For this to happen, a phase of ‘surrender and transition’ will be required.”
We confirm the view Niko Lechuga and Andy PittBoth common partners in Ego Death.
“The traditional system is already destroying itself,” they said. “Banking systems are failing billions of people around the world – this is very evident in emerging markets, even in Western countries. At the same time, the Visa and Mastercard duopoly is holding back innovation and opportunity, so that when competition emerges—including through the Lightning Network, which provides super-fast and cheap transactions—they’re already in the process of self-destruction.
The Lightning Network is also seen as a game changer for payments Oleg Mikhalsky Fulgur Ventures because, as he puts it, “almost instant settlement with very limited counterparty risk is a well-positioned Lightning feature to reduce traditional payment overhead and reduce the counterparty risk inherent in fiat rails.”
“For the development of the digital economy, we need a local digital currency with two characteristics: speed and the ability to make microtransactions. We believe that Bitcoin and Lightning will become global money and payment standards. Some aspects of the adoption spectrum of the Lightning Network have not yet been explored: we are in video games , we’re seeing some adoption in digital content monetization, but there are other use cases like machine-to-machine payments and microtransactions for energy.”
More and more Bitcoin-only startups
Contrary to what you might think, during a year when the market crashed dramatically, only the world of Bitcoin startups experienced very significant growth. As all VCs surveyed for this article attest, the number of companies focused solely on Bitcoin has grown significantly over the past year. When the Pandora’s box of the cryptocurrency world was discovered, it’s reasonable to assume that entrepreneurs realized it was wiser to focus on a technology whose foundations didn’t continue to be solid from the start.
Julian LinigerThe CEO of Relai – a Swiss startup that allows users to buy and sell bitcoins illegally – highlighted future growth.
“In the long run, investing in Bitcoin-only startups is less risky than crypto startups: investors see Bitcoin-centric companies as a more profitable and more sustainable business model,” he said. “Only with Bitcoin VCs are we 100% aligned. They see the future in 10 years, they understand where we are going, they understand that all the experiments that are happening in other blockchains will end on bitcoin.”
This is a guest post by Federico Rivi. The views expressed are entirely their own and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.