Right now the crypto market is a fake boom economy built on VC money and parties

Asia is a crucial step for crypto companies. It is where exchanges, market makers, liquidity providers and traders meet to help bring tokens to life. So Singapore was our chance to assess the viability of all the projects that are about to come to market. Do they have real communities, builders, usability and demand that support them?

I immediately questioned these expectations. I checked into my hotel, where rooms can cost upwards of $700 even if you book months in advance, only to be greeted by community managers of various projects in their early 20s who I’m sitting in the hallway, next to me. This was before the conference even started and they were already throwing multi-thousand dollar pool parties. And that was just the beginning. Every night I saw parties that must have cost hundreds of thousands of dollars, with types of DJs flying in that you usually only see at Coachella or Ibiza.

At this point, you might be wondering – well, that’s just crypto, right? And yes, the last bull cycle of 2021 was dominated by massive, flashy parties, many thrown by my fellow VCs. But there was real interest from retail investors and plenty of noisy capital for us to think it was normal. That’s not true now, and investors aren’t the ones throwing the parties. Most projects and VCs themselves are struggling to raise, some of the biggest VCs are reducing their funding target. So where does the money come from?

The answer is clear: the money is coming from VCs, who are pumping funds into new level 1 and 2 blockchains that have not yet launched a testnet, but still amount to valuations of over billions of dollars. And clearly, a lot of that funding goes to so-called “marketing expenses,” which are really just huge parties.

That would be all well and good if you could prove that there was some sort of return on investment – like branded parties for consumer goods – but I’ve yet to see any evidence that a crazy disco party results in anything kind of return on investment.

Videos posted on X of events with lines stretching across floors definitely create a “I want to check this project out” feeling. But do I want to build on that party-based project? This is an artificial boom economy built on top of venture capital money.

The future of crypto

Now, I know you won’t shed any tears over wasting your venture money. But if you care about the future of the crypto industry, there are real consequences. Crypto projects raise money through tokens, which means that in order to retain their astronomical valuations, their token launches must support a certain price level. We’ve seen the opposite with all the high-profile token launches of the past year, from Wormhole to Celestia to Etherfi to Avail, which have declined in value.

Yes, venture funding is back, and projects are once again growing to huge valuations. But everyone knows it’s a bubble. This is the first time since crypto started that we have multi-billion dollar VCs that have too much money to deploy. Pumping money into their own projects at a higher valuation is good for them to have higher unrealized valuations, all so they can raise more funds without actually paying anything to their investors. VCs lost all accountability from their projects when they started making token investments because there are no board or financial transparency requirements.

The bottom line is that many credible VCs have started to lose patience. No one celebrates 22 year olds who raise millions of dollars and then just throw parties instead of hosting builder days.

In 2017, this was a new space. We had a lot of young founders and we thought we would find maturity. But this year is the first time I’ve started to feel like we’re not going to get to that point. When I talk to exchanges and liquidity players, they realize that retail investors are not just buying into the hype of the parties and that the valuations are too high for regular customers to support and profit from.

Now should be a time of introspection for every VC in the crypto space as we head into the expected bull cycle. Let’s not brag about raising an unrealized rating. We need sustainability if we want family offices, high net worth individuals and retail clients to continue to believe in our world.

Kavita Gupta is the founder and managing partner of Delta Blockchain Fund. You can follow @kavitagupta19.