Home Venture Capital Crypto VC on Where the ‘Biggest Alpha’ Is During a Bear Market

Crypto VC on Where the ‘Biggest Alpha’ Is During a Bear Market


  • Vance Spencer is the cofounder of $1.4 billion investment firm Framework Ventures.
  • Spencer explains where the “biggest alpha” is during a bear market.
  • The firm was an early backer of lending giant Aave and blockchain gaming developer Illuvium.

In 2014, Vance Spencer and Michael Anderson first stumbled into crypto via Ethereum’s whitepaper. The two, Spencer said, were some of the first thousand to download the document and read it.

“Our perspective at that point was, ‘who is the 18-year-old kid, Vitalik Buterin?” Spencer told Insider. “But I had always had an interest in fringe technology. It felt like a logical next step.” 

The two quit their jobs at


and Snapchat to start a blockchain-based sports collectible startup called Hashletes that they later sold to begin DeFi, or decentralized finance, venture investing. 

“We were living in Michael’s parents house at the time,” Spencer said. “There was no concept of failure because the case in which we failed was almost too disheartening to consider.” 

In 2019, Spencer put all of his money up to be one of three LPs in Framework Ventures – a fund that would soon become one of the largest DeFi investment firms in all of crypto. 

“We put all of our chips and cash on the table in terms of backing the fund,” Spencer said.

Framework Ventures was formed under the thesis that blockchains are built for broader use cases than the market had at the time. 

Tons of people were holding crypto, Spencer said, but didn’t have the ability to utilize it to its full potential. This includes lending, staking, and yield farming.  

At the time, however, the DeFi market was worth less than $1 billion. 

“We decided on DeFi as our first major thesis because it was right on the horizon. We knew it was going to work soon and we could put a lot of momentum behind it.” he said. The firm later announced its first $15 million fund in 2019.

Framework Ventures bet big on the sector with investments in


protocol Synthetix, blockchain oracle network Chainlink, and lending giant Aave. Synthetix (SNX) and Chainlink (LINK) jumped 137% and 264% in the span of a year. 

In 2020, the firm used an $8 million raise to launch Framework Labs, a development arm of the venture firm that builds proprietary software to help scale and incubate its current investments. 

This is a part of the firm’s “technology-first” strategy, cofounder Anderson said. This led the $1.4 billion firm to become one of the largest liquidity providers for DeFi projects.

“That’s our best source of alpha going forward,” Anderson previously told Insider.

Pitching to a $1.4 billion crypto investment firm

Last month, Framework Ventures announced a $400 million fund, allocating half of the capital to blockchain gaming projects. The venture firm has previously invested in play-to-earn developer Illuvium and GameFi platform Polemos. 

“We’ve gone from DeFi because it was the first category to have product-market fit to gaming,” he said. “We’re going for investments that are more mainstream and more consumer in their nature now.”

These investments, Spencer says, reflect the direction of the industry as well.

Blockchain gaming garnered $2.5 billion in investments last quarter, according to a recent BGA and DappRadar report that also predicts investments in the nascent space will shoot up by 150% this year. VC firm Andreessen Horowitz announced a whopping $600 million fund devoted to gaming investments on May 18. 

When choosing their next venture, Spencer said, the firm looks for a team that’s willing to take risks and be competitive. This is not, however, in the same capacity as a traditional VC would do.

“I think in Web2 this would mean poaching Stanford undergrads from their college dorm rooms,” he said. “But we really value non-traditional backgrounds.”

Seventy percent of the Framework Venture’s portfolio is international, including gaming developers like Illuvium. 

The team also has to have the technical ability to build their products and be flexible amid a murky regulatory environment. 

“They also have to be okay with living in the gray area that is the crypto regulatory atmosphere right now,” he said. 

Where’s the alpha?

Following the collapse of UST and LUNA, broader crypto markets toppled as well. This is also in part due to the Federal Reserve’s rate hikes to soften inflation as seen by bitcoin and ethereum trading in tandem with risky tech stocks.

Bitcoin and ethereum fell 25.88% and 32.45% in the past month, according to Messari. On May 12, crypto markets shed $200 billion in a single day.

Before investing, Vance recommends looking at the fundamentals of a project and not whatever is trending in the space at the moment.

“You want to run a little bit countercyclical to whatever the main investment narratives are,” Spencer said, citing PFP NFTs, or profile picture non-fungible tokens. 

Popular collections, which holders often use on their social media profiles, include the Bored Ape Yacht Club, Cool Cats, and World of Women. Individuals NFTs from these collections have gone for an upwards of $2.7 million worth of ethereum. 

“People thought PFP collections were going to be the future. That’s probably not going to be the case. It’s probably something with a little bit more utility,” he said. “Think about products people actually want to use and orient your career on that.”

In a

bear market

, Spencer recommends staying away from trying to predict price action with technical analysis. 

“Things that are not good uses of your time are doing TA on charts,” he said, adding that crypto markets are more often than not unpredictable.

Go straight to the source, Spencer said, specifically Ethereum developer calls.

“That’s where all the alpha is,” Spencer said. “That’s where you can actually tell what is going to be featured in the network and potentially the price that will follow.”

These are public calls, hosted by the Ethereum Foundation, where users can hear more about network upgrades and updates on its blockchain. 

“On the trading side, I’d emphasize more research, due diligence, and getting involved in something,” Spencer said. “That is the only thing that will keep your interest during the bear markets. It’s never going to just be the prices.”

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