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- Retirement Funds Moving into Crypto
- Invest in crypto through top-tier crypto VCs
- Private debt funds Capital pooled in Liquidity Pools
- Beyond it is just a toy attitude is important in innovation of any kind
Emin Gun Sirer: I told you about how retirement funds were moving into crypto.
In response DeFi Vader, DeFi analyst stated, “Since retirement funds, endowments and SWFs don’t mind keeping capital locked for 10+ years, they’re likely to invest in crypto through top-tier crypto VCs.
Crypto VCs come up with a new vintage almost every 2 years meaning they deploy initial capital in 2 years and reserve some capital (~30%) for follow-ons. Crypto VCs have also started running liquid vehicles where they can invest in traded tokens like AVAX, SUSHI, AAVE.
If we assume that a retirement fund allocates $100m in crypto today; 70% illiquid, 30% liquid, then the distribution schedule would be: $30m cash distributed today, $55m in 1 year, $80m in 2 years, $100m in 3 years.
Thus, the crypto investment decisions made by retirement funds are likely to turn into cash in 2-3 years. I believe the retirement funds will commit an increasing amount of capital every year and will be a stable long-term capital source for the crypto market.
Another interesting aspect is whether retirement funds decide to invest in private debt funds who only put capital into liquidity pools and yield farms on DeFi protocols like SUSHI, CRV, AAVE, PNG. The institutional long-term capital can significantly boost the TVLs.
While all these discussions are happening it is important to realize that new technologies often arrive with flaws: toy-like, expensive, junky, lacking clear applications, etc. To predict how they’ll develop, it’s important to dig deeper.
Chris Dixon, expressed, “It’s just a toy.” This was the mistake made early on about breakthrough technologies like the telephone, personal computers, and social media.
When the telephone was first invented, incumbents like Western Union dismissed it, as the sound quality was poor and it only worked at short distances. They failed to imagine how quickly those things would be improved.
Early on, blogs and services like Twitter were mostly used to discuss niche tech topics and share mundane personal details. A lot of people dismissed them as toys or passing fads. Today billions of people rely on social media as their primary news source.
Social media was a technology for creating global media networks that arrived disguised as a way to share what you had for lunch.
“It’s too expensive.” We hear this today about electric vehicles, space travel, virtual reality headsets, and more. Hardware almost always starts out expensive. Over time, the costs drop rapidly as manufacturing know-how and economies of scale kick in.
Thus, many breakthrough technologies, especially those involving computers, don’t directly solve problems. Instead, they unlock new capabilities, which in turn enable users, developers, creators to solve problems.
Similarly so with crypto and investments in crypto.
