As the digital asset industry picks up steam again, some crypto funds are looking to home in on specific sectors.
Crypto fund Asymmetric Financial is creating its Bitcoin DeFi Venture Fund I to focus on investing in the blockchain’s nascent space with a target raise of $21 million. The fund will be spearheaded by general partner Dan Held, former director of growth at Kraken and long-time Bitcoiner.
Decentralized finance or DeFi uses blockchain-specific technology — in this case Bitcoin — as a way for market players and retail investors to transact with one another directly, typically through self-executing contracts, negating the need for third parties and institutions. Some target uses for DeFi include decentralized lending and borrowing applications, which allow individuals to access capital without needing to show a credit score, for example.
Held will be working alongside the firm’s CEO and CIO Joe McCann to make more “contrarian bets.” Held has pushed for DeFi in the Bitcoin ecosystem for years and was a marketing advisor for Ordinals-focused Taproot Wizards and Bitcoin application-focused Trust Machines.
“I had boots on the ground and saw the traction of NFTs on Bitcoin and lending and borrowing on top of Bitcoin that could be built and were built,” Held said. “There’s a really important role unfilled in the Bitcoin ecosystem.”
As it stands, very few crypto venture capital firms invest in Bitcoin-centric startups, and those that do often veer away from subsectors of the blockchain like DeFi, layer-2 (L2) scaling networks, Ordinals and decentralized applications (dApps).
“Most crypto VCs don’t perceive bitcoin as a place to invest in,” Held said. Many Bitcoin-focused VCs ignore DeFi because it’s speculative, and broader crypto VCs see it as a “dead boomer rock,” he added.
But he’s convinced that both sides are wrong. “There’s a new wave coming that I’ve seen coming for years. Now is the right time to do it, we’re at the beginning of the next cycle and a lot of talent is coming onboard.”
Held sees the most opportunities in L2s, which are layer-2 blockchains that offer greater speed and higher throughputs than layer-1 blockchains like Bitcoin’s, and “meta-protocols,” which consist of NFT-like Ordinals and other similar actions. Much of this activity has centered on the Ethereum blockchain, but Held believes Bitcoin’s blockchain has tons of future potential as an ecosystem.
“When building L2 architecture or dApps, you would want to build on top of the most popular chain by unique users, volume and liquidity and value,” Held thinks. “Bitcoin is a trillion-dollar asset and all that is waiting to be unlocked in DeFi and collateral.”
As it stands, bitcoin’s market capitalization makes up about 51.2% of the total market capitalization, which is about $2.05 trillion, according to CoinMarketCap data.
“Why would you build on top of the Apple App Store or Google Play Store? Because users are there,” Held said. “Bitcoin undeniably has the largest network in terms of owners and liquidity. It’s a no-brainer to invest and build in this sector.”
While the Bitcoin NFT ecosystem is fairly new, some days there’s more NFT trading volume on Bitcoin than Ethereum, Held noted. According to CryptoSlam data, in the past 30 days, Bitcoin’s blockchain had over $279 million in NFT sales volume, with about $54.7 million coming from Ordinals, making it the second largest chain behind Ethereum at $527 in sales volume. “It’s nascent and new but it’s one of the important areas to watch,” Held added.
Held is not alone in his bullishness to build atop Bitcoin. In general, market players have speculated that there will be a large number of large funding rounds this year for L2 chains scaling Bitcoin, signaling that interest in this area is budding.
But, Held is aware that building on Bitcoin is harder than other chains, given it’s early days for its L2 infrastructure and the number of developers focusing on the ecosystem is smaller. In a somewhat similar vein, Bitcoin developers and users don’t build on the blockchain itself but use L2s to “do the fun stuff,” Held said.
“L2s on Bitcoin are even more compelling than Ethereum because of that increased expressivity.”
The team declined to share how much has been raised to date but said the “interest has been overwhelming” and existing capital came from ultra high net worth individuals and funds of funds. The fund will be investing with deals mainly with tokens, but also considering equity. Aside from writing checks, Held hopes to bring his longtime expertise as a Bitcoin marketer and operator to help each project with brand positioning, customer acquisition and exploring greater market depths.
All in all, Held said he thinks the next “DeFi summer,” a term used to describe when the DeFi space explodes, will happen on Bitcoin in 2025, or possibly sooner if developers create infrastructure quickly. “It will be a Bitcoin DeFi renaissance.”
“Bitcoin is worth more than every other crypto asset combined,” Held added. “This is the largest asset that is getting unlocked and using that money in DeFi, this is the biggest opportunity that will ever exist in crypto.”