Paradigm-backed tokens showed some VC assets still outperform

Not all VC-backed tokens go through the same scenario. Paradigm has backed a selection of assets, and some stood out as top performers. 

Paradigm is one of the crypto VC companies with the most varied portfolio. The fund has entered some of the high-profile token projects from the 2021 bull market. The assets have shown varied performance, based on overall market conditions. Not all VC-backed tokens have the same pattern, though some have fallen to a low baseline with no signs of recovery.

The Paradigm brand was also seen as a booster to newly launched tokens in 2021. After years of ICOs, the presence of official, high-profile VC funds was seen as a badge of quality and a way to vet new crypto startups. The presence of Paradigm was at least an insurance against blatant ICO rug pulls. 

It would take years to cause skepticism about VC-backed projects, where traders noticed supply expansion and a constantly sliding price. But some Paradigm-backed projects still managed to outperform. 

The portfolio of Paradigm also helped bring new features and boost liquidity for the 2024 bull market. Paradigm backed Coinbase, OpenSea, SkyMavis, Chainalysis and other top performers that retained their advantage despite the 2022-2023 bear market. The Paradigm portfolio included a total of 92 crypto companies of varying sizes.

The Paradigm Crypto Fund III is still ready for more investments with $850M, following the Crypto Fund from 2021 with $2.5B. In addition to startups and Web3 companies, Paradigm directory bought Bitcoin (BTC), which is one of its best-performing positions. 

Post-TGE price performance of tokens backed by @paradigm.

Tl;dr:

Even if a project has a reputable backer, that does not automatically convert into great returns for public market investors. pic.twitter.com/1zcwfAw9Tt

— Token Terminal (@tokenterminal) August 3, 2024

Maker DAO among top-performing positions

Maker DAO (MKR) is among the Paradigm investors still in the green due to the positive performance in 2024. MKR benefitted from high fees, managing to get a significant boost from the early token sale levels. 

MKR traded at $1,907.06 even after the market correction, and had a nearly 400% rally in 2024. Paradigm entered Maker DAO back in 2019, alongside Dragonfly Capital Partners. The two VC funds acquired $27.5M in MKR tokens at the early stage. MKR peaked at above $5,300 in 2021, and continued to trade at a higher baseline. 

The success of MKR also hinged on Ethereum (ETH), which is also among the top performers in Paradigm’s portfolio. Paradigm could also participate in the governance of Maker DAO, since the early purchase amounts to more than 5.5% of the MKR supply. However, a more recent check shows Paradigm does not register any MKR tokens among its holdings, and may have divested the share. 

Lido DAO and Optimism offer mixed returns

LidoDAO (LDO) and Optimism (OP) are two of the Paradigm projects that still go above their token generation price, but are more volatile. Paradigm still holds more than 70M LDO tokens, in addition to 543.66K OP tokens. 

AXS is also among the investments that only added a small net gain compared to the token launch, and has not returned to previous all-time high.

STRK was among the big losers and a cautionary tale when it comes to VC-backed projects. Starknet (STRK) was among the most promising L2 solutions, but its market price crashed soon after listing. STRK suffered from disproportionate initial valuations, and retail investors ended up absorbing the price shock. 

STRK reached a peak market valuation above $8B during the 2021 bull market, though with a heavily incentivized user base. STRK now trades at an all-time low of $0.34, with a market cap of $554M. STRK still has more than 80% of its tokens outside of circulation, facing slim chances of a price recovery.

Other positions by Paradigm include FRIEND, BLUR and BLAST, which have only gone down and erased all gains from their initial pump. Even deeper losses were incurred by DYDX and GTC. Paradigm also holds other minor tokens, where it has not shed its positions. 

Paradigm has a hands-on approach to its projects, with a technical supervision of the projects. Target investments range between $1M and $100M for eligible projects. On the positive side, Paradigm tracks a project’s on-chain security audits, and helps with marketing. But the 2024 market showed that the VC reputation is not enough to ensure investor loyalty. 

Cryptopolitan reporting by Hristina Vasileva