10 things you can learn from the 2021 Multicoin Capital Summit

Multicoin Capital’s hedge funds have a return rate of more than 20,287%. Its No. 1 fund raised 135 times the MTM net MOIC and 28 times the net return in 2018. It is one of the most successful venture capital funds in history. Here are 10 things I learned at the company’s recent summit in Miami that can explain the company’s outstanding performance and its outlook for 2022.

  • Obey discipline and avoid FOMO

They believe that this performance is the result of patient selection and asset allocation during the bear market. They will not try to time the market. Instead, they focus on selecting assets that fit their investment theoretical framework and form concentrated long-term positions to generate asymmetric returns. The basic belief is that you don’t need to catch them all. FOMO has created sub-par returns.

  • Paper first method

The job of the investment team is not to find good investments, but to form papers on how technology will advance and implement and how the market will develop. Then they happen to monetize these insights through investment. The main part of their investment memorandum:

  1. What is our paper?

  2. What assumptions did we make?

  3. How about this compound?

Once they have formed the paper, they will figure out the best way to present their portfolio to the paper. If it happens to be something that the primary market likes, venture funds go first, otherwise hedge funds. They are missionaries rather than mercenaries. They want to create more freedom in the world, have a greater impact and push the frontier.

  • When to exit:

Three reasons to sell assets from their hedge funds:

  1. The argument was proven, and the perfect value they expected was achieved.

  2. The paper is invalid. They learned some new information and no longer believed it.

  3. other.

Venture funds are different. If they continue to believe in the asset, and it is liquid, they will begin to allocate it to limited partners and collect interest rates. If they no longer believe it, they will sell it. They only want to invest in what they think they can hold for 10 years, at least when they enter.

  • Recruitment target

  1. Enough to formulate thesis and critically reason about how technology and the market will develop. When writing the essay, you must explain what you actually know, what you really believe in, and how you form beliefs around it.

  2. Be flexible enough to reconcile your beliefs about the paper with your ability to identify problems. Rather than abandon this concept altogether, it is better to update what you have with new information and revise the paper.

  3. Don’t change your mind just because others disagree with you, because the only way to get extraordinary returns is to go against the trend and be right.

  4. Need to understand the business model of working in the open source, permissionless world. Since anyone can copy your code and there is no IP, you must have a different way to capture the value. This is completely different from what traditional investors can understand. It takes 6 months for people with traditional investment experience to learn and become a native of cryptocurrency. It is best to find people who have the skills to become investors, but have not learned all these bad habits from traditional finance, and can reason all these things from first principles from day one.

  5. Candidates are evaluated based on their writing ability, not their academic qualifications.

  • Open Finance (DeFi) and Web3

Open Finance (DeFi) and Web3 are the two major themes driving the performance of Multicoin Capital.

The total value locked in open financial agreements, as well as the total transaction volume and activity in these agreements, is increasing dramatically. This is driven by the emergence of liquidity financing, in which these agreements can basically buy liquidity with their tokens. Facts have proved that this is an extremely effective guidance mechanism that has triggered incredible growth and has attracted the attention of almost everyone in the financial services industry.

In terms of web3, NFTs are the first big products that truly realize the product market fits web3. The total number of users who own crypto wallets is exploding. This is mainly due to NFT, which brought blockchain and cryptocurrency wallets into the mainstream.

  • Bitcoin decoupling:

Historically, most crypto assets accounted for a large proportion of the transaction volume denominated in Bitcoin. Market makers must hold a large amount of Bitcoin inventory in order to operate a business. However, stablecoins have recently taken over and become the main “currency” for crypto transactions. Its supply has exploded, reaching 80 billion U.S. dollars. On the other hand, the use of Bitcoin as collateral for derivatives transactions has greatly reduced. The decline in Bitcoin’s relevance represents a major shift in the crypto market system. It leads to a decrease in the correlation between crypto assets and wider return dispersion. They expect that this trend will continue as Bitcoin loses relevance.

  • Composability:

According to Jesse Walden, “composability” is defined as “if a platform’s existing resources can be used as building blocks and programmed into higher-level applications, then the platform is composable.”

For some time, people have been talking about the need to expand the blockchain. However, throughput alone is not enough. You must be able to group things together and allow users to engage in a variety of new social interactions on an open public permission-free system.

Composability is the center of everything they consider now, especially how they allocate and invest. They believe that in the next 12 months, the next generation of applications will rely on a large number of composable encryption primitives. These applications will provide an experience that was not possible before.

Lego bricks are an excellent visual metaphor for understanding composability. Many people in the crypto community are talking about “currency Lego blocks” or “DeFi Lego blocks”. They believe that the next generation of applications will be Lego Castle built on Solana.

  • Solana is Crypto’s “iPhone Moment”

The iPhone has completely changed our society. It creates a design space for developers to build applications required by mainstream users, resulting in a large number of mobile-first services such as Instagram, Snapchat, Uber, WhatsApp, etc. They think Solana is the “iPhone moment” of Crypto. Solana provides a design space for entrepreneurs to innovate in encryption and move the stack up to more user-oriented real-world applications. In fact, in the past 18 months, Solana has grown from nothing to one of the top five crypto assets, of which 15 billion TVLs are distributed in 32 protocols. 

  • Creator economy

Creators are very excited about cryptocurrency because it allows them to directly connect with fans, introduce new participation models, and implement new monetization methods without using intermediaries. Traditionally, advertising has been one of the most common ways for creators and influencers to monetize. This is a bad user experience. Creator tokens or social tokens change the way influencers and creators interact with their fans and will improve the overall user experience.

  • Metaverse

The general rule of thumb is that if the tone deck contains the word “Metaverse”, investment should be avoided. Metaverse is still in its early stages and requires a large amount of core back-end infrastructure to operate. It is best to focus on the deep technical infrastructure layer.

Written by: emagicTT

Compile: Alex

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/10-things-you-can-learn-from-the-2021-multicoin-capital-summit/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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