Analyst asserts Venture capitalists are predominantly controlling the cryptocurrency market
Justin Bons, the Founder and Chief Investment Officer (CIO) of Cyber Capital, Europe’s oldest cryptocurrency fund, has voiced sharp criticism of the prevailing financial model in the cryptocurrency market, which heavily relies on Venture Capitalists’ (VCs) fundraising. Bons contends that the dominance of “predatory VCs” in cryptocurrencies is a direct consequence of regulatory pressures that effectively outlawed Initial Coin Offerings (ICOs), thereby relinquishing the early-stage market entirely to VCs.
This sentiment is echoed by another analyst, Miles Deutscher, who views these new fundraising dynamics as fundamental flaws hindering cryptocurrencies from achieving greater heights. Both analysts agree that the VC-centric model disadvantages retail investors, driving them away from the market.
Bons argues that the current state of the crypto market, under VC hegemony, is far from optimal. He criticizes VCs for engaging in “pre-pre-pre-sales” at steep discounts, only to later sell tokens to retail investors at inflated prices—a practice he labels as unfair and exploitative. He advocates for the reinstatement of ICOs, which he believes democratized fundraising in crypto by allowing broad participation on equal terms.
The regulatory landscape, according to Bons, presents a paradox where individuals are permitted to buy lottery tickets but are restricted from investing in potentially lucrative early-stage crypto ventures. This, he argues, has transformed the crypto market into an exclusive “VC boys club,” akin to traditional equity markets. Regulatory barriers such as stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, coupled with high minimum investment thresholds, further alienate smaller investors.
Bons underscores the success of ICOs in fostering major decentralized finance (DeFi) projects like Ethereum (ETH) and asserts that regulatory pressures prematurely stifled this model. He warns of the inherent conflict between crypto tokens and equity, which can lead to rent-seeking behavior among VCs, potentially undermining token economics.
Despite VC dominance, recent data indicates a modest recovery in crypto funding, with projects raising an average of $1 billion monthly since March 2024, as reported by CryptoRank. However, this figure pales in comparison to the VC-fueled boom of 2021-2022, when monthly funding often exceeded $3 billion.
In conclusion, Bons calls for a reevaluation of current regulations, arguing that excluding retail investors from early-stage crypto investments only perpetuates their exploitation later on. He advocates for regulatory reforms that allow retail investors to participate equitably, promoting a more transparent and inclusive investment environment based on knowledge rather than privileged access.