This episode tackles the contentious debate sparked by a recent Hasu podcast discussion: should crypto VCs benchmark their performance against Bitcoin, fundamentally questioning how investors should evaluate returns in distinct digital asset classes.
The Bitcoin Benchmark Debate Ignites
- The conversation kicks off referencing a tweet concerning a recent two-part podcast featuring Hasu, which argued that Venture Capital (VC) funds investing in crypto should not benchmark their performance against Bitcoin (BTC).
- This viewpoint has generated significant discussion, particularly contrasting with the perspective of many liquid market investors who believe BTC is the appropriate benchmark.
- The core tension lies in whether VC investments, often targeting early-stage crypto projects and infrastructure, represent a fundamentally different, potentially decorrelated market compared to Bitcoin's role as a macro asset.
Jon Charbonneau's Perspective: Separate Markets, Separate Benchmarks
- Speaker Jon Charbonneau weighs in, largely agreeing with the sentiment he understood Hasu expressed: benchmarking crypto VC funds against BTC is generally inappropriate.
- He acknowledges the common counterargument – whether VCs can outperform Bitcoin on a risk-adjusted basis – calling it a "totally valid point."
- However, Jon emphasizes that VC funds and direct Bitcoin holdings cater to fundamentally different investment theses and market exposures.
Bitcoin vs. Venture Crypto: Distinct Investment Theses
- Jon clarifies his stance by explaining how he advises LPs (Limited Partners, the investors in a VC fund). He states, "...we tell LPs like if you want Bitcoin exposure like you should go buy Bitcoin... that is the majority of the crypto that I hold in my PA is it's just Bitcoin."
- He argues that investing in Bitcoin provides exposure to its potential as digital gold, a macro asset, and a hedge against uncertainty. This is distinct from the goals of crypto venture capital.
- VC investments, conversely, offer exposure to the potential upside of innovations like stablecoins revolutionizing finance or new blockchain applications transforming tech startups.
- Jon highlights the possibility that one thesis (e.g., Bitcoin as digital gold) could succeed while the other (e.g., specific blockchain applications) fails, or vice versa, reinforcing their distinct nature.
Alternative Benchmarking for Crypto VCs
- Instead of Bitcoin, Jon suggests a more relevant benchmark for crypto VCs would likely involve a basket of major altcoins (alternative cryptocurrencies to Bitcoin).
- He proposes evaluating VC performance against a weighted average benchmark including assets like Ether (ETH), Solana (SOL), Binance Coin (BNB), and other significant tokens.
- This approach aligns the benchmark with the actual universe of assets and market segments that crypto VCs typically invest in, providing a more accurate measure of relative performance within that specific high-risk, high-reward ecosystem.
Strategic Implications for Investors
- For Crypto AI investors and researchers, this discussion underscores the critical need to differentiate between direct Bitcoin investment and allocations to crypto VC funds.
- Evaluating a VC fund requires understanding its specific strategy and comparing its performance to relevant peers or a suitable altcoin index, rather than solely against Bitcoin's price movements.
- Recognize that VC funds aim to capture upside from nascent crypto sectors and technological breakthroughs, a different risk/reward profile than holding established assets like Bitcoin.
Conclusion
- The conversation argues strongly against using Bitcoin as a universal benchmark for crypto VC performance, emphasizing the distinct market exposures and investment theses involved.
- Investors should evaluate VC funds based on benchmarks relevant to their specific strategies, likely involving a basket of major altcoins.
