New Trends in Institutional Capital Inflow into the Crypto Market: In-Depth Analysis by VanEck Investment Manager

As the crypto market undergoes multiple rounds of bull and bear transitions, the flow of institutional funds has become the focus of market attention. VanEck portfolio manager Pranav Kanade delves into the strategic shifts of institutional investors, the structural opportunities in the liquidity token market, and the upcoming wave of tokenized stocks in a recent interview.

Ways Institutional Funds Enter the Crypto Market

Pranav pointed out that institutional funds are entering the crypto space through two main forms: direct purchases of related assets and the establishment of on-chain products through asset tokenization. Currently, global capital flows are primarily controlled by family offices, high-net-worth individuals, endowment funds, foundations, pensions, and sovereign wealth funds. These institutions make investment decisions through passive strategies like ETFs( or active strategies like professional managers).

However, many institutions have not really "arrived" yet. Family offices may have entered earlier, valuing the potential for liquidity returns. Last year, many institutions began purchasing Bitcoin ETFs, which provide a simple way to gain exposure. Another way is through venture capital, searching for large blue-chip managers for allocation.

Advantages and Challenges of the Liquidity Token Market

Pranav believes that there are structural opportunities in the liquidity token market. Since 2022, approximately $60 billion in capital has flowed into early-stage venture capital projects, and many founders tend to exit through token forms. However, this trend has also exposed liquidity issues in the market. Many projects that exited through tokens have seen token prices generally decline over the past 12 to 24 months due to a lack of sufficient market demand to support the value of these tokens.

Early Investment VS Secondary Market Liquidity

Pranav observed that investors are starting to shift from early investments to the more liquid secondary market. He pointed out that there is a supply and demand imbalance in the crypto market, especially in terms of liquidity. Due to insufficient capital supply, while the market has a huge demand for tokens and projects, investors need to sift through numerous tokens to identify projects with potential.

The Importance of Revenue Models and Cash Flow

Pranav emphasized that the crypto industry faces a binary choice: to become an accessory to the internet or to focus on creating real value such as income (. He believes that all other assets, aside from value storage, will ultimately be seen as "capital return type" assets. The crypto industry needs to clearly explain why its assets have value in order to attract mainstream capital.

Tokenized Stocks: The Next Trillion-Dollar Opportunity

Pranav predicts that the popularization of tokenized equity may drive market capitalization growth. Traditional enterprises may choose to exit the market in the form of tokens rather than equity. Tokenized equity not only has the attributes of traditional equity but can also achieve more uses through programmable features, such as rewarding users or creators.

Stablecoin Legislation and New Opportunities

Pranav believes that stablecoin legislation is about to be passed, which will drive a series of companies to adopt stablecoins to optimize their business cost structures. Some investors have already begun to focus on companies in the public market that may benefit from stablecoins, ranging from internet companies to e-commerce platforms, the gig economy, and sports betting.

L1 Valuation and Future Outlook

Pranav pointed out that the value of L1 assets should not be judged solely based on short-term data, but rather focus on developments over the next 2 to 5 years. He predicts that within the next three years, the number of users directly or indirectly using on-chain applications could reach 500 million, which would make the current valuations of certain L1 projects appear undervalued.

The Future of Infrastructure and Applications

Pranav believes that there has yet to be a case of a killer application migrating from its native chain and building a complete technology stack independently. He predicts that L1 infrastructure may form an oligopoly similar to that in the cloud computing sector, with applications switching among a few giants rather than building their own chains.

Overall, Pranav's perspective highlights that the crypto market is at a critical turning point, with the influx of institutional funds, the rise of tokenized stocks, and the legislation of stablecoins all shaping the future direction of the industry.

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