Most Mainstream Investors In China is Taking a Wait-and-See Approach on Blockchain and ICOs
Now, blockchain has become a hot topic in both internet sectors and venture capital( VC) circles in China. From a long-term investment perspective, what is the real value of this technology?
95% of Blockchain Projects are “Pipe Dreams”
In 2017, a group of blockchain-focused investment institutions were founded in China, such as INBlockchain and Viking Capital. In addition, some small and medium-sized funds like Fountain VC also rushed headlong into the blockchain world.
Fountain VC set up a blockchain incubator last October and have invested in 6 projects. As a newcomer, the firm’s CEO George voiced his concern about the industry in an interview with the state-owned newspaper Securities Times.
“We have reviewed hundreds of blockchain or cryptocurrency white papers before we launched the incubator. We find that high-quality projects account for less than 5% of the total , and the remaining 95% seem like pipe dreams, which do not comprehend the nature of blockchain. ”said George.
Although high-quality projects are rare, the finance world is going crazy for blockchain initiatives. The amount of money raised by blockchain startups via traditional venture fundraising in the first two months of 2018 alone are more than 40% of the way to 2017’s high water mark, according to Crunchbase data. This means, the investment bubble appears.
There are investors complaining that some blockchain projects artificially raised its valuation, and investors scramble to get one piece of those projects with irrationally high prices. Some traditional companies which had nothing to do with blockchain previously now seek to capitalize on the fever to improve their sluggish performance.
Mainstream Investors Take a Wait-and-See Approach
In fact, the vast majority of traditional investment institutions at present show little interest in investing in blockchain-adjacent companies in China. In other words, only a small portion of fund mangers have entered the market, while most of investment firms still take a wait-and-see approach.
But some insiders believe that the mainstream investment firms will enter the blockchain ring in the near future, and then blockchain-related investment will gradually get more rational, and the valuation of blockchain projects will become more and more reasonable, expediting the process of blockchain adoption.
Charles Xue(better known by his online alias “Xue Manzi”), China’s well-known angel investor and a crypto enthusiast, shared the similar insights. He mentioned on his Wechat Moments last week that, “ The era of speculative trading and investing in cryptocurrencies has passed. The amount of capital blockchain entrepreneurs are going to raise is expected to be less, and the valuation of projects will return to a reasonable level.”
He thought the blockchain space will become increasingly polarized in future with high-quality projects becoming more successful, while scam projects or those without core competitiveness being phased out over time.
“The bubble starts to burst.”Xue said.