📌 MUST READS

Move aside AI, crypto is back!

For investors this year, AI has been the belle of the ball, hovering up what seems like any available dry capital post the FTX blow up. Nothing emphasized this more than when traditionally crypto-focused VCs began pivoting away from crypto to focus on AI.

But that seems to be changing as a slew of recent VC firms have announced major fundraises to continue to support the crypto ecosystem.

First we had Coinfund’s $158 million fundraise in July, which was shortly followed by Polychain Capital’s $200 million raise.

This week though, Blockchain Capital, one of the most prolific VCs in crypto, announced that it had raised $580 million for two separate funds.

The money will be split between a $380 million “early stage” fund that will invest in Seed and Series A rounds… and a $200 million “opportunity” fund that will invest in late stage fundraising.

Why It Matters
Since the collapse of FTX in late 2022, private financing for crypto deals has fallen off a cliff. According to Architect Partners, crypto private financing declined 75% in the first half of 2023 versus first half 2022.

This dearth has caused multiple projects (especially in the metaverse and NFT space) to shut down.

Now, many of these companies that have shut down were unneeded and simply byproducts of the 2022 hype cycle built off of the back of free government money, zero interest rates, and covid-induced YOLOing. But, for an industry as young as crypto, new capital is needed to rebuild and disrupt.

That’s why Blockchain Capital’s fundraise is such a big deal. It may just be a sign of more capital to come.

🔍️ DEEP DIVES

Much of crypto is reeling.

NFTs are at their lowest point ever… most tokens are down significantly from their ATH… and when was the last time you heard the word “metaverse” used in a sentence that wasn’t a joke?

But, with all that, one area of the crypto market is doing quite well: liquid staking.

According to DefiLlama, the total value locked (TVL) for liquid staking protocols has grown more than 290% over the past year to $21 billion. The last time the TVL was anywhere close to this high was in June 2021 right before the TerraUSD blowup.

(For a recap of what exactly liquid staking is and why it is important, you can refer back to our article explaining it here)

This growth has led liquid staking to become the largest DeFi segment, surpassing lending and DEXs.

The result? The largest liquid staking protocol, Lido’s, native token is up more than 30% this year.

What’s Driving the Growth?
As much of the crypto ecosystem is shell-shocked from the major blowups leading to an extended bear market, receiving a solid yield has become more and more interesting.

Right now, Lido and Rocketpool are paying ~3.7% APR on staked ETH. Now sure, that’s lower than the ~5% yield you can get on Treasury’s right now, but let’s be honest, inflation is going to eat away any major benefit from fiat anyway.

This Success is Causing Potential Negative Side Effects
While this may be getting into the technical weeds a bit, the success of liquid staking and Lido in particular also comes with some risks.

You see, for Ethereum to be “credibly neutral” it can’t have one protocol controlling everything. That control happens when a protocol has more than 33% of overall staked ETH. We won’t go into all the details, but if you are interested in learning more you can read this and this.

As of today, Lido has more than 32% of staked ETH marketshare according to Dune. The battle is on.

TWEET OF THE WEEK

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