As the digital asset industry picks up again, some crypto funds are looking to enter certain sectors.
Crypto fund Asymmetric Financial is creating Bitcoin DeFi Venture Fund I to focus on investing in the nascent blockchain space with a goal of raising $21 million. The fund will be led by general partner Dan Held, former Kraken development director and longtime Bitcoiner.
Decentralized finance, or DeFi, uses blockchain technology — in this case Bitcoin — as a way for market players and private investors to trade with each other directly, usually through self-executing contracts, negating the need for third parties and institutions. Some targeted uses of DeFi include decentralized lending and borrowing applications, which allow people to access funds without having to show, for example, a credit score.
Held will work with the company’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 consultant for Ordinals-focused Taproot Wizards and Trust Machines focused on Bitcoin applications.
“I had boots on the ground and saw the attraction of NFTs to Bitcoin and the borrowing and lending over Bitcoin that could be built and built,” Held said. “There’s a really important role that hasn’t been filled in the Bitcoin ecosystem.”
As it stands, very few crypto venture capital firms invest in Bitcoin-centric startups, and those that do often stray from blockchain subsectors such as DeFi, Layer 2 (L2) scaling networks, Ordinals, and decentralized applications (dApps).
“Most crypto VCs don’t see bitcoin as a place to invest,” Held said. Many Bitcoin-focused VCs ignore DeFi because it’s speculative, and broader crypto VCs see it as a “dead rock of rapid growth,” he added.
But he is 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 are at the start of the next cycle and a lot of talent is coming on board.”
Held sees the most opportunities in L2s, which are layer 2 blockchains that offer greater speed and higher throughput than layer 1 blockchains like Bitcoin, and “meta-protocols,” which consist of NFT-like Ordinals and other similar actions . Much of this activity has focused on the Ethereum blockchain, but Held believes that the Bitcoin blockchain has tons of future potential as an ecosystem.
“When you’re building L2 architecture or dApps, you want to build on top of the most popular chain of unique users, volume and liquidity and value,” Held muses. “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 the Google Play Store? Because the users are there,” Held said. “Bitcoin arguably has the largest network in terms of holders and liquidity. It’s unlikely to invest and build in this area.”
While the Bitcoin NFT ecosystem is fairly new, some days there is more NFT trading volume on Bitcoin than on Ethereum, Held noted. According to CryptoSlam data, in the past 30 days, the Bitcoin blockchain had over $279 million in NFT sales volume, with about $54.7 million coming from Ordinals, making it the second largest chain after Ethereum with $527 in sales volume. “It’s nascent and new, but it’s one of the important spots to watch,” Held added.
Held is not alone in his bullishness to build on top of Bitcoin. In general, market players are speculating that there will be a large number of large funding rounds this year for Bitcoin scaling L2 chains, signaling that interest in this sector is nascent.
However, Held knows that building on Bitcoin is harder than other chains since it is early days for the L2 infrastructure and the number of developers focused on the ecosystem is smaller. Similarly, Bitcoin developers and users don’t rely on the blockchain itself, but use L2s to “do the fun stuff,” Held said.
“L2s on Bitcoin are even more exciting than Ethereum because of this increased expressiveness.”
The group declined to share how much has been raised to date, but said “the interest has been overwhelming” and existing capital has come from ultra-high-net-worth individuals and funds of funds. The fund will invest with deals mainly with brands, but also with stocks. In addition to writing checks, Held hopes to bring his long-time expertise as a Bitcoin trader and operator to help each project with branding, customer acquisition and deeper market exploration.
Overall, Held said he believes the next “Summer of DeFi,” a term used to describe when the DeFi space explodes, will happen in Bitcoin in 2025 or possibly sooner if developers build infrastructure quickly. “It will be a rebirth of Bitcoin DeFi.”
“Bitcoin is worth more than every other crypto asset combined,” Held added. “This is the biggest asset being unlocked, and using that money in DeFi, this is the biggest opportunity there will ever be in crypto.”
