Crypto meltdown, Celsius crash deepens rift between Web3 fans and skeptics

Crypto meltdown, Celsius crash deepens rift between Web3 fans and skeptics

Investor disagreements over Web3’s potential have intensified this week, with cryptocurrency sales halted and the cryptocurrency platform Celsius Network largely going bankrupt.

Celsius Lifting has stopped Citing extreme market conditions. For similar reasons, hedge funds have reportedly had difficulty covering three arrows of capital redemption.

The latest downturn in cryptocurrency prices has created a barrier to Web3 VC dealmaking and valuation.

Proponents of Web3 hope that this new iteration of the Internet, marked by a decentralized platform based on blockchain technology, will ultimately reverse the “evil” of big technology and traditional banks, allowing all users – only founders, investors and employees – to benefit financially. From their participation.

The market capitalization of all cryptocurrencies could fall by about two-thirds to less than 1 trillion, but crypto enthusiasts are not going to give up easily.

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“People who have been working on crypto since 2010 have seen this price cycle four or five times before. Their skin has thickened,” said Yash Patel, a general partner at Telstra Ventures, a supporter of FTX and a supporter of cryptocurrency derivatives exchanges. The latest value is $ 32 billion.

Web3 believers are ready to play the long game even if it takes five to 10 years to convince the world of the true value of their favorite technology. They are convinced that once the utility of blockchain tokens becomes clearer, price volatility and speculation will be reduced.

But not all investors are feeling so patient.

“I think Web3’s flaws are coming out,” said one venture capitalist who supported a handful of crypto startups. “The whole space is moving so fast that everything is broken.”

Although he still finds the concept of programmable money strong, he said that many things, from regulations to user experience, need to be changed in order to feel comfortable investing in these companies again. “It’s a scary and insecure place right now,” he said, referring to the complex decentralized finance protocol that Celsius Network relies on.

Other venture capitalists are taking a more measured approach to Web3. These investors believe that blockchain may have useful applications, but they do not subscribe to the view that it is realistic to rebuild the entire Internet on top of it.

Sandhya Hegde, a general partner at Unusual Ventures, said she sees blockchain as a new exciting technology among many.

“We’re not subscribing to some philosophy here. Like, ‘Oh, that’s a good way to survive,'” he said, referring to crypto fans who see Web3 as a norm. “We don’t work that way.”

Unusual Ventures, like many other Generalist VCs, focuses on investing in Web3 infrastructure or plumbing of crypto systems. These VCs say that by betting on so-called pick-and-shove startups, they are helping the crypto ecosystem become more reliable and secure and less fraudulent.

But Phil Libin, a former managing director with General Catalyst and co-founder of Evernote and Mmhmm, compared the believers Contact Web3 for communist propagandaI think investing in infrastructure equipment is a little unreasonable.

“You’re making picks and shovels, basically saying, ‘We’re making things that benefit people who believe. [Web3]”Few people made money during California’s gold rush,” says Libin.

He has been a vocal critic of Web3, calling these technologies not only impractical but also harmful.

For Libin, the biggest embarrassment is Celsius, whose founder and CEO wore a T-shirt that said “banks are not your friends,” now perhaps Citigroup, a bank, is asking for bail.

Crypto fans and skeptics will probably continue to disagree on the usefulness of the industry for next year.

In the meantime, one thing is clear, the first signs of VC pullback from this sector are here.

Investors say they are seeing a big downturn in contract activity and declining valuations.

Last year, seed-level crypto startups would be valued at between $ 50 million and $ 100 million, but more recently, the price of deals has dropped to $ 20 million, Unusual Ventures ’Hegde said.

“I see less and less people starting crypto companies right now,” Hegde said. “It’s almost stagnant.”

Featured image by Celsius CEO Alex Mashinsky by Piaras Ó Mídheach / Getty Images

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