Everyone's About to Learn the Same Lesson Again

Raising money for a crypto project just a few years ago was remarkably easy.

All you needed to do was rock up to a venture capitalist with a whitepaper in hand and memorise your pitch on how it's going to disrupt finance and technology.

And just like that, you'd be walking out with a team of VCs on your side and a brand spanking new cryptocurrency that was all the rage.

This kept happening over and over again. New blockchains pitched as an improvement on the existing networks, when in reality they basically did the same thing. "It's faster, processes stuff better, dishes out rewards better than the other blockchains!" the teams would pitch.

You see, back in these days, investors were buying in first then thinking later. Nobody really knew how this was all going to play out but they felt they needed exposure and dished out the cash.

This isn't a new thing though. This is just what happens with new technology.

In the late '90s, you could walk into a VC meeting with a domain name and a business plan, and walk out fully funded. Revenue? Worry about that later. The pitch was just "the internet changes everything" and that was enough.

Then the bust came and suddenly founders needed something they'd never been asked for before: proof.

Same pattern, different decade.

And you're seeing it play out with AI right now.

There's a tremendous amount of money being spent on AI and most of it will largely be wasted. The four big hyperscalers are set to spend close to $700 billion on AI infrastructure this year. Amazon alone is guiding $200 billion in capex. Their free cash flow is projected to go negative. Alphabet's free cash flow is expected to drop by almost 90%.

Most of this AI money is going to be burnt. The industry will eventually settle down to just a handful of winners and the rest will have been a very expensive experiment. That's not a knock on AI, the internet was a generational technology too, it just destroyed most of the companies that tried to ride it first.
So now back to crypto.

Crypto is coming out of a pretty mighty bust, and we're realising that all these blockchains and projects that VCs funded had no product market fit and they're now on their way to zero.

And people like to blame the VCs for extracting value out of the ecosystem, but that couldn't be further from the truth. These are people who rightly or wrongly took a bet, financed this experimental phase in the market, and some managed to get out while others lost money. Someone had to pay for the experiments that failed so the market could figure out what actually works.

But now we're on the other side of this bust, the fundraising conditions are as tight as they have ever been.

Before, VCs funded the vision. Now they're funding the evidence.

The bar has gone from "show me a whitepaper" to "show me your revenue."
And this is exactly where I want to be putting money to work.

My prediction is that the tiny group of cryptocurrencies actually generating revenue will do exceptionally well from here. I'm not all that worried investing in them because I'm not financing just another vision in a saturated market, I'm buying into something I know has found that product market fit.

Canton is a great example of this.

Over $8T settled for financial institutions every month and it's generating millions of revenue every single day.

This recent bust has already done the work of clearing out the garbage. The dot-com bust gave us Amazon and Google. Crypto's bust is going to reveal its own version of those winners, Canton being one of them.

I'm fully allocated across my crypto account for the first time in months.

Not because I'm being reckless, but because for the first time in a while, the risk-reward actually makes sense to me.