It’s easy to buy an asset after it goes up 200%. You may not make any money. You may, in fact, lose 80% of your principal. But pulling the trigger and deploying capital amidst a barrage of exponentially larger green candles is easy. It’s just how humans are wired. While the ideal mode of action is to “buy low and sell high”, its easier to try to “buy high and sell higher”.

The last decade has been one of the best for momentum/growth investors and traders. And this further solidified the mindset to deploy capital into avenues that have consistently performed well. Buying assets that are performing well is not a bad decision so long as there is a thought other than “but what if it keeps pumping” behind said decision. More often than not, momentum comes from conforming to the crowd. And unfortunately, this is the state of the crypto funding environment today.

After DeFi Summer in 2020, scalable infrastructure was realized as the need of the hour. Ethereum’s congestion was the stuff of nightmares. $100 at times to transfer ETH or make a trade on Uniswap. This spawned a lot of infrastructure plays, from Ethereum forks with some modifications to completely new frameworks. During DeFi Summer, crypto VCs and individual investors wanted nothing more than to fund DeFi plays. And they continued to do so with vigor even as the euphoria faded away.

I can’t pinpoint the exact moment investors decided to re-focus and allocate capital to infrastructure, but it was around the time Avalanche’s C-Chain and Solana went live. SOL’s parabolic price appreciation, in particular, was a cue for crypto VCs that infrastructure-centric bets were the best place to deploy capital. And, well, two years on and they have yet to realign their focus.

Between rollups, appchains, data availability networks, privacy-centric networks, and various other pieces of infrastructure, we are in a pretty healthy place as an industry. The base technology is advancing rapidly. Unfortunately, it seems most investors only want to fund new pieces of infrastructure and not the things being built on top of it. And so the question of the hour: when will that change?

Likely after consumer crypto apps begin to flourish at scale. Friend Tech is a great first-move, but it will take more than one application to make investors halt their desire to deploy an entire fund into blockchain infra. A first cohort of bootstrapped consumer apps must do well and create a sense of FOMO amongst larger investors. Based on historical evidence, that’s what I think it will take for crypto VCs to seriously look at consumer apps and DeFi again.

Of course, we cannot paint all investors with the same brush. Seed investors in Compound, Uniswap, Solana, and other ventures had the foresight to understand what they could be before it happened. This is more with respect to broad based flows in the primary market. Remember the slew of AI startups and the sheer amount of venture capital directed at AI after OpenAI took the world by storm? The real visionaries were people betting on AI before ChatGPT exploded. Everyone who came after was just momentum investing.

Being countercyclical is difficult for everyone across the investment spectrum. Everyone talks about buying a token when it’s down 80% — a handful of them actually do it. It’s the same with VCs. Throwing the house at blockchain infrastructure projects (or AI) is the safest way to achieve positive risk-adjusted returns — until it isn’t.