What should you buy when the market crashes? Crypto VCs are betting on these types of projects

Original article: Steven Ehrlich , Unchained

Compiled by: Yuliya, PANews

Global financial markets have recently experienced severe turbulence, and the cryptocurrency sector has not been immune. However, as the investment community often says, market reversals often create rare buying opportunities for far-sighted investors. In this turbulent environment, it is particularly important to understand the layout strategies of professional investors.

Cryptocurrencies continue to fall along with the broader market as President Trump announced massive and indiscriminate global sanctions last Wednesday. As of writing, Bitcoin is down 5.86% since then, even after recovering from its first drop below $75,000 since the November 5 election. Other large-cap cryptocurrencies such as ETH, Solana, and XRP have also underperformed the market leader during this time.

In such a market environment, market panic has clearly heated up. The Cboe VIX index, which measures expected stock market volatility, hit 60 for the first time since the outbreak of the COVID-19 pandemic, while the Deribit Bitcoin Volatility Index (DVOL), the closest alternative to VIX in the cryptocurrency market, has risen nearly 30% in the past week.

In this situation, it is natural for investors to seek safety - or buy U.S. Treasuries. However, there is a common adage in the investment community: "Be greedy when others are fearful and be fearful when others are greedy." This means that now is the opportunity to buy blue-chip assets at a discount. To understand how professional money is positioning the cryptocurrency market during this volatile period, two major venture investors who requested anonymity shared insights into their respective firms' strategies and provided key information on which categories and sectors may perform best in the coming weeks and months.

Store of Value: Bitcoin and Ethereum

Although not surprising, both respondents believe that Bitcoin is still the first choice. Gold has hit new highs recently and is widely regarded as a symbol of safe-haven assets. At the same time, Bitcoin is increasingly showing its attributes as a "digital value store". Despite the recent volatility, from the market value comparison chart, there is still a lot of room for growth between Bitcoin and gold.

The current market value of gold is about $20.4 trillion, while the market value of Bitcoin is only $1.64 trillion. One investor pointed out: "To reach a 1:1 market value ratio with gold, Bitcoin must rise at least 12 to 15 times. In the current environment, this is the easiest and most secure opportunity."

Ethereum is also considered an asset to watch, although it has lagged far behind Bitcoin in price performance in recent years and is currently at its lowest point relative to Bitcoin since the early days of the pandemic.

One interviewee mentioned that after Ethereum switched from proof of work (PoW) to proof of stake (PoS) in 2022, its monetary policy tended to be deflationary, which allowed it to take on Bitcoin's "value storage" narrative to a certain extent. Despite the recent poor network usage and the rebound in inflation, from a valuation perspective, the current price is at a historical low.

Another investor said: “Ethereum is so low now, it’s really a good time to buy.”

Solana and the DeFi Opportunity

Decentralized finance (DeFi) tokens have generally suffered a heavy blow this year, with native tokens of exchanges and lending protocols such as Uniswap, Aave, Curve and Compound falling nearly 50% year-to-date. However, both investors believe that this sector is expected to rebound strongly amid the continued tightening of the current macro environment.

One of them pointed out that during a period of low stablecoin returns, DeFi may actually see a return of funds . Because in the on-chain lending and borrowing combination cycle operation, there are still ways to obtain relatively high returns. "This is very similar to the situation in 2021," he added.

Two projects worth paying attention to are Raydium and Hyperliquid. The former is a traditional automated market-making exchange built on Solana, similar to Uniswap; the latter focuses on perpetual contracts, which are cash-settled derivatives.

If you don’t want to pick a single token, you can also focus on Solana itself. “Solana is like an index fund for DeFi in some ways. There are a lot of very interesting DeFi projects developing on it.”

EigenLayer and Near: The next round of infrastructure opportunities

Both investors believe that the "AI+blockchain" concept that was popular last year was mostly exaggerated . One of them said bluntly, "Basically all of them are empty projects." But he also pointed out that this situation is not uncommon in the early stages of the track, and the ICO boom in 2017 was also the case. "The first wave is usually empty projects, but there will also be a little bit of real things in them, and these are what are worth paying attention to in the next few years."

They believe that the next phase of the AI narrative is more likely to fall on "AI agents," such as travel robots that automatically book tickets. The question is, how to ensure that funds deposited with such agents will not be stolen? One way is to have their security guaranteed by the security of Ethereum itself.

However, Ethereum is not suitable for all projects, mainly due to high transaction costs and the need for some applications to run across chains . EigenLayer was born in this context, providing a "shared trust layer" for applications, allowing projects to leverage the security of Ethereum without having to be fully deployed on its mainnet.

“Once your application runs on EigenLayer, the security of its funds is guaranteed by Ethereum,” said an investor, who also mentioned that Near may also benefit from this trend.

EigenLayer was once one of the most anticipated projects on the market, but its token was launched in October last year, when the bull market was near its peak, and then the price plummeted by more than 80%. But if the current narrative holds, it means that investors can buy at a significant discount. One investor added: "EigenLayer's market value is less than $1 billion now, and this is an opportunity to buy and hold."

Overall, although the crypto market is still digesting uncertainties at the macro and policy levels in the short term, for institutional investors, now is a critical time to reconfigure assets and lay out a new round of upward cycle. From value storage assets, to infrastructure and DeFi platforms, to emerging AI interactive applications, the direction of capital betting has gradually emerged.