Messari Fund Analysis H1'21: Examining Liquid Portfolios of Crypto Funds

Of the thousands of cryptoassets, a few hundred tokens have circulating market capitalizations over $50 million. At least one hundred tokens have market caps over $500 million and a few dozen are unicorns. The smart money investors – venture capital funds, hedge funds, mercenary liquidity providers – are making bets across various sectors DeFi, NFTs, Web3, The Metaverse – at various stages of growth (all the way from sub $50 million to well over $1 billion).

We’ve tracked down many of the top venture capital (VC) firms and hedge funds in crypto and recorded their liquid portfolios (assets that trade on the market). This of course could miss equity investments or investments in networks that are not yet live.

In total, our analysis shows that combined, forty-four funds hold 225 unique assets across various sectors including smart contracts, DeFi, Web3, Scaling, Interoperability, and NFTs.

(Messari Pro comes with access to our full list of community screeners, including VC portfolio screeners for Multicoin, Pantera, Paradigm, ParaFi, Three Arrows Capital, and more). To find the list of portfolio screeners go to Messari.io/screener and for screeners by Messari Research in community section:

• A16z
• Alameda Research
• Arrington XRP Capital
• Binance Labs
• Dragonfly Capital
• Electric Capital
• Fabric Ventures
• Framework Ventures
• Fenbushi Capital
• Galaxy Digital
• Kenetic Capital
• LedgerPrime Capital

The public nature of these portfolios and the availability of most cryptoassets ensures that both institutional and everyday investors can get in on the action (and lose together too).

Messari Fund Analysis

The April Messari Screener

Messari conducted this same analysis back in April with only 35 funds and the top 5 held assets were:

• Polkadot
• Keep Network
• Uniswap
• Compound
• Filecoin
• Maker
• Nervos Network.

The July Analysis

After analyzing all the portfolios, we found the top asset invested across the forty-four funds we’ve tracked is Polkadot (DOT). In fact 19 of the 44 funds own DOT, meaning 44% of our tracked funds have a vested interest in Polkadot’s success (remember this when you see a bunch of people shilling Parachains on Twitter).

Note, we assume most of these funds hold Ethereum and Bitcoin and therefore omitted them from our analysis.

The second most popular asset across the portfolios that we track is Terra (LUNA) – an algorithmically-governed, seigniorage share style stablecoin platform. Terra users locked over $2.2 billion worth of assets in its two applications, Mirror Protocol and Anchor Protocol, by the end of Q2. Anchor Protocol, unsurprisingly is also on the top 35 list amidst its recent growth.

Tied for third most invested were smart contract platforms Near Protocol (NEAR) and Oasis Network (ROSE). Both are smart contract platforms but to date have less adoption than competitors like Solana, Ethereum, and Avalanche.

An equal-weighted portfolio of the above list would have posted returns of +77% YTD with Solana and Terra being the best performers of the portfolio at 1,569% and 958% respectively.

Diamonds in the VC Funded Rough

We have also created a Messari screener displaying these assets (ordered by market capitalization). Of the 35 assets with over six unique venture or hedge fund investors, Radicle, Lido DAO, Oasis, DODO, and Balancer maintain the lowest circulating market capitalization. Interestingly, Lido DAO is one of three assets in the derivatives sector (also PERP and SNX) within the top-funded asset list while Radicle is one of the only Web3 projects reflected within the most funded list, besides The Graph and Orchid. Still, it’s important to note that circulating market cap can sometimes be misleading and it’s important to consider the fully diluted value of these assets. Tokens with high fully diluted valuations need to be able to grow into their valuations.

One trend worth noting is that venture investors clearly see large total addressable markets within the smart contract space and DEX landscape as they are the most frequently invested sectors within the top-funded assets.

Additionally, it appears that most funds appear to be under-exposed to Web3, NFTs, and more emergent sectors like the metaverse. This gap in exposure presents a potential opportunity as more investments could flow into these sectors in the coming 6-12 months. It’s also possible that these funds are already invested in these sectors and that those positions are illiquid or in projects that have yet to launch tokens and thereby not reflected in this analysis.

Investing Like a Crypto Fund

Investing like a crypto fund – venture or hedge – has never been easier. An average investor can quite literally copy-trade these portfolios and mirror any of their favorite funds. But, while copy-trading a prominent VC might appear at face value to be a good strategy, it’s important to remember that non-accredited or professional investors still don’t have equal access.

Most of these funds typically receive private placements at far cheaper valuations, and the short-term focused funds are waiting to liquidate a portion of their tokens once vested to record profits for their investors. Further, during a bull market liquid assets – especially newer projects – often trade at a premium due to the expectation of a greater future valuation.

While there are still barriers for individuals to invest in early-stage crypto projects, the opportunities are 10x better than the legacy financial world. The age of the everyday investor is dawning and crypto will be the primary avenue for growth.

As of Jul 1: Messari Fund Screener Spreadsheet

Disclaimer: On Feb. 16, 2023, the SEC stated that LUNA and UST are "securities". A couple notes: (1) Messari does not provide financial or trading advice - our services are for informational purposes only; and (2) Messari's services are impersonal - do your own due diligence. Please refer to our Terms of Use for more info.

On March 9, 2023, the State of New York alleged that LUNA and UST are "securities". A couple notes: (1) Messari does not provide financial or trading advice - our services are for informational purposes only; and (2) Messari's services are impersonal - do your own due diligence. Please refer to our Terms of Use for more info.

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All content was produced independently by the author(s) and does not necessarily reflect the opinions of Messari, Inc. Author(s) may hold cryptocurrencies named in this report. This report is meant for informational purposes only. It is not meant to serve as investment advice. You should conduct your own research, and consult an independent financial, tax, or legal advisor before making any investment decisions. Nothing contained in this report is a recommendation or suggestion, directly or indirectly, to buy, sell, make, or hold any investment, loan, commodity, or security, or to undertake any investment or trading strategy with respect to any investment, loan, commodity, security, or any issuer. This report should not be construed as an offer to sell or the solicitation of an offer to buy any security or commodity. Messari does not guarantee the sequence, accuracy, completeness, or timeliness of any information provided in this report. Please see our Terms of Service for more information.

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