Blockworks 2049 Observations: The Asian crypto market is booming
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Blockworks 2049 Observations: The Asian crypto market is booming
Jason and Santi delved into the astonishing scale of Asian cryptocurrency exchanges, the emergence of yield-generating stablecoins, and the stark contrast in adoption rates between Asian and Western users.
Navigating Web3 tides with focused insightsCompilation & Translation: TechFlow
Participants: Jason Yanowitz, Co-Founder of Blockworks; Santiago R Santos, Investor
Podcast Source: Empire
Original Title: Asia's Crypto Boom, Stablecoin Wars, and Crypto's Global Shifts | Roundup
Release Date: September 21, 2024
Background Information
In this episode, Jason and Santi dive deep into their experiences at Token2049 in Singapore. They discuss the impressive scale of Asian crypto exchanges, the emergence of yield-generating stablecoins, and the stark contrast in adoption rates between Asian and Western users. The conversation also touches on founder fatigue in the crypto space, Singapore’s unique governance model, and the evolving venture capital landscape.
Token2049 Recap
Scale and Atmosphere of the Singapore Conference
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Yano and Santi discuss the state of the Token2049 conference. Santi shares mixed feelings about attending conferences but emphasizes the importance of engaging with founders and experiencing the atmosphere firsthand. The event drew 20,000 attendees—double last year’s figure—and felt more like a SaaS conference, with many participants actively negotiating and closing deals.
Observations on the Asian Market
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Yano notes that despite his initial assumption that Token2049 was primarily an American event, there were actually large numbers of Asian participants. He stresses that the Asian market is far from being just a "bot farm," but rather hosts a massive base of real users.
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Santi adds that the development of consumer finance alongside internet giants in Asia has made crypto applications more widespread. Apps like Grab have already integrated crypto wallets into their services.
Surprises and New Discoveries at the Conference
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Yano mentions discovering numerous unfamiliar companies and products at the event, highlighting the diversity and growth potential within the crypto industry. Both Yano and Santi participated in multiple panel discussions, including topics on crypto and AI, as well as investor perspectives on liquidity and venture capital.
Strong Performance of Asian Exchanges
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Yano shares observations on Asian exchanges, noting their profitability far exceeds that of U.S. counterparts. For example, Bybit is projected to earn $3 billion in profit this year, while Bitget, the fifth-largest derivatives exchange, is also performing strongly. These figures underscore the significant market size and earning power of Asian exchanges.
Growth of Cryptocurrency in Asia
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Santi learned from a ByteDance executive that India is expected to become its largest market in the next five to ten years. While China remains a key market, India’s demographic structure and demand potential make it a critical future market.
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Santi further points out that market demands across Asian countries vary significantly—for instance, Vietnam and the Philippines have large developer bases, while India and Indonesia represent massive markets poised for rapid growth in financial infrastructure and user demand.
Evolution of Crypto Platforms
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Yano believes current crypto exchanges are transforming into broader financial service platforms. For example, OKX is no longer just a crypto exchange but aims to become an all-in-one platform akin to WeChat. As markets regionalize, exchanges must obtain licenses in various jurisdictions, leading to a wave of mergers and acquisitions and intensifying competition among exchanges.
The Battle for Stablecoins
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Yano also highlights that the stablecoin market is entering a new phase of competition. With the launch of new yield-generating stablecoins like PYUSD and PayPal’s stablecoin, USDC faces increasing pressure. Although USDC benefits from its partnership with Coinbase, other players are seeking ways to offer competitive products without relying on Coinbase.
The Future of the Stablecoin Market
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Santi and Yano offer their outlook on the future of stablecoins, predicting a multi-stablecoin ecosystem may emerge.
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Yano mentions Rune’s new stablecoin USDs could gain prominence as demand for yield-bearing stablecoins rises. They discuss strategies for acquiring users through exchanges and custody services, as well as leveraging partnerships to drive stablecoin adoption.
Industry Skepticism and Outlook
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Santi notes growing skepticism within the industry, especially toward newer blockchains. Nonetheless, they remain optimistic about Asia’s future, believing real user needs and market potential will continue to fuel growth in the crypto sector.
Founders Shutting Down Operations
Reasons Behind Founder Exits
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Santi points out that many founders shut down not due to running out of funds, but because of unclear market demand and product positioning. He observes that after a period of experimentation, many startups can only return 20 to 30 cents per dollar invested. Upon reflection, he identifies misalignment among founders and vague understanding of the problems they aim to solve as primary causes.
Shifts in Industry Talent Quality
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Santi expresses concern over changes in talent quality within the industry. He believes founder quality improved steadily over recent years, but recent trends suggest a decline. He’s unsure whether this shift stems from the FTX and Luna collapses or changing regulatory environments. Many new founders entered the space in 2021 and lacked long-term commitment.
Mindset of Founders
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In conversations with founders, Santi began focusing on how they perceive their own identities. He notes that successful entrepreneurs often share common traits—persistence and hard work. He believes that even top-tier founders may feel discouraged when user demand is lacking. Even elite engineers might feel disheartened if their work receives little attention.
Storytelling vs. Market Competition
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Yano argues that many current founders rely too heavily on storytelling rather than building actual products. He notes that teams without clear market demand can still attract investors through compelling narratives. Santi agrees, observing that in crypto, strong storytelling often outweighs underlying technology.
Hope for the Future
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Despite current challenges, Santi remains optimistic about the future. He believes that as more institutions enter the market, truly valuable technologies will gain recognition, and high-quality founding teams will stand out. Projects like Helium have already proven the viability of their business models, which will push overall industry development and competition, encouraging founders to improve both capabilities and product quality.
Lack of Focus on L2 Scaling Solutions
Conference Observations
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Yano notices a near absence of discussion around major L2 solutions like Optimism and Arbitrum at the conference. He observes that this event wasn’t Ethereum-centric, unlike previous years. Instead, Tron had a strong presence, having held a prominent position since the 2018 and 2019 editions.
Rise of Bear Chain
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Yano points out that Bear Chain has executed exceptional marketing in the region. He found more developers engaged with Bear Chain than with Optimism, indicating rising local influence.
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Santi also notes Bear Chain’s success in launching its MVP program, having personally funded three to four startups built on Bear Chain.
Participant Enthusiasm
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Yano adds that although he isn’t an investor in Bear Chain or related companies, he was struck by the level of enthusiasm among participants. Bear Chain recently hosted an event with 10,000 sign-ups, though only 800 could attend—demonstrating immense interest and engagement.
Conclusion
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Overall, while major L2 solutions received little attention at this conference, the rise of Bear Chain and high participant enthusiasm indicate that the blockchain ecosystem continues to evolve. Santi and Yano are closely watching these developments and look forward to further innovation and progress.
Singapore Market Analysis
Impressions of Singapore
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Yano visits Singapore for the first time during the conference and is deeply impressed by the country’s operational efficiency. Through conversations with taxi drivers, he learns they are friendly and hold unique views on U.S. social issues. One driver expressed confusion over homelessness in the U.S. and noted Singapore’s stricter approach to drug policy.
Social Policies and Governance
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Yano also comments on Singapore’s strict government policies—for example, limits on vehicle usage duration for taxi drivers and the high cost of car ownership (including application fees). These policies effectively reduce air pollution and enhance urban living standards. He contrasts this with the U.S., which faces challenges such as high crime rates and political dysfunction.
Politics and Talent
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Yano discusses the strengths of Singapore’s political system, noting that top-tier talent often chooses public service over careers in tech firms or hedge funds. He believes this contributes to Singapore’s superior governance compared to many other nations.
Sustainability and Scalability
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Santi notes that while Singapore’s governance model has succeeded, replicating it elsewhere remains debatable. He raises questions about scalability, particularly within blockchain and cryptocurrency ecosystems.
Conferences and Side Events
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During the conference, Yano and Santi discussed attendee engagement and the richness of side events. While the main conference was massive, side events offered more intimate settings for deeper discussions.
Current State of the Venture Capital Market
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Yano also comments on current dynamics in the VC market, particularly performance differences among top-tier funds. Some funds that previously raised $300–500 million are now raising only $100–200 million, reflecting shifting expectations around VC returns.
Summary
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Singapore stands out as a unique market case due to its efficient governance and strict social policies. While the replicability of its model elsewhere is debated, its success in improving quality of life and social stability offers valuable lessons. Meanwhile, the current blockchain and venture capital landscapes present both new opportunities and challenges worthy of continued attention.
Venture Capital Dynamics
Current Fundraising Environment
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Yano and Santi discuss current dynamics in the venture capital market, particularly fundraising performance among large VC funds. They note that funds which previously raised $300–500 million are now raising only $100–200 million—a sign that market expectations around VC returns have shifted.
Return on Investment
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Santi notes that traditional venture capital typically achieves 4x to 5x returns, placing such funds in the top tier. They discuss varying fund performances, suggesting that limited partners (LPs) may reevaluate investment relationships if certain funds underperform.
Investment Strategies and Success Factors
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Yano emphasizes that success in venture capital often hinges on identifying one or two breakout investments that dramatically boost overall fund returns. Using Dragonfly and other top-tier VCs as examples, he highlights how investments in successful projects like Chainlink or Aave have driven outsized returns.
Changing Investment Landscape
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Santi notes that today’s market environment differs from the past, especially regarding interest rates and economic cycles. He stresses the need for investors to adjust expectations accordingly. He advises targeting capture of 50% of cyclical returns rather than aiming higher, which helps reduce risk and protect capital.
Personal Investment Experience
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Santi shares his personal investment journey, noting that he began his career in a low-interest-rate environment, which shaped his investment strategy. Despite rapid market shifts, he emphasizes maintaining clarity and realistically assessing return expectations.
Conclusion
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The current venture capital market faces challenges, with shifts in fundraising conditions and return expectations prompting investors to reassess strategies. Successful investing still depends on identifying and supporting high-potential projects, while remaining flexible and adaptive in a constantly changing environment.
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