Institutional Fund Flows and the Future Development Trends of the Crypto Market

As the crypto market experiences multiple rounds of bull and bear cycles, VanEck portfolio manager Pranav Kanade recently shared his views on hot topics such as institutional fund flows, liquidity token market opportunities, and tokenized stocks in a deep interview.

Institutional funds are gradually entering the crypto market.

Pranav stated that institutional funds are entering the crypto market through two main methods: directly purchasing relevant assets and developing on-chain products through asset tokenization. Currently, global capital is mainly controlled by family offices, high-net-worth individuals, and endowment funds, who make investment decisions through passive strategies like ETFs( or active management.

Family offices entered the encryption field relatively early, valuing its liquidity returns. Last year, many institutions began purchasing Bitcoin ETFs as a simple way to gain exposure. Another method is through venture capital, seeking large management institutions for allocation. However, many institutions have yet to venture into liquidity assets or related fields.

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There are structural opportunities in the liquidity token market

Since 2022, approximately $60 billion in capital has flowed into seed pre- and seed round venture capital projects. Many founders tend to exit through tokens rather than the traditional IPO route. This trend also exposes liquidity issues in the market, as many projects that exited through tokens have generally seen token prices decline over the past 12-24 months due to a lack of sufficient market demand support.

Capital is shifting from early investments to the secondary market

Pranav pointed out that the supply and demand in the crypto market is severely imbalanced, especially in terms of liquidity. Due to insufficient capital supply, there is huge demand for tokens and projects in the market, and investors need to sift through numerous tokens to identify the projects with potential. Only a very small number of projects that have clear product-market fit, can generate income, and reward token holders are worth paying attention to.

The Importance of Revenue Models and Cash Flow

Pranav believes that the crypto industry must focus on creating real value ) such as revenue (. Apart from value storage assets, other assets will ultimately be seen as "capital return type" assets. Crypto projects need to clearly explain why their assets have value in order to attract mainstream capital.

Forecasting future cash flows is also very important. Even if the project currently does not have a clear value capture mechanism, as long as the team is excellent and responsible, relevant mechanisms can still be designed in the future. The key is to identify projects that can achieve value capture in the future.

Tokenized stocks may become the next trillion-dollar valve

Pranav expects that the popularization of tokenized equity may drive market capitalization growth. Tokenized equity not only possesses traditional equity attributes but also enables more use cases through programmable features. This model may further expand the current $700 billion alternative token market, with more companies potentially opting for on-chain IPOs instead of traditional IPOs.

L1 Valuation: Focus on Development in the Next 2-5 Years

Pranav believes that the value of L1 assets should not be judged solely based on short-term data, but rather focus on the development over the next 2-5 years. The key is to assess whether the future income scale of these chains and the current asset valuation are reasonable. Traditional cash flow models may not be applicable for evaluating the crypto market, and the on-chain user base may experience explosive growth in the future.

Future Development of Infrastructure and Applications

Pranav believes that there has yet to be a killer application that has migrated from its native chain and independently built a complete technology stack. L1 infrastructure may form an oligopoly similar to that in the cloud computing sector. Whether cryptocurrencies can create killer applications and move towards the mainstream through existing Web2 giants or startups backed by VCs remains to be seen.