CMT digital is a global blockchain and Web 3vc firm and so I'm curious to get Your firsthand observations on the space According to defi llama data Venture Capital funds invested $634 million in Crypto startups in July that's up 15% From the month before now last month Pitchbook released its Q2 crypto report Revealing that deal count dropped in the Quarter but the total deal value ticked Up to $2.7 billion which pretty much Shows that on a deal by deal basis check Sizes were larger however pitchbooks q1 Report showed an increasing both deal Value and deal count so what do those Q2 Results signal to you and what are you Noticing in terms of VC Investments Right now yeah absolutely I mean I'll Step back and and and say that we're a Generalist investment firm in the Blockchain and digital asset space um we Like to be early to Investments we like To invest Before categories are are named and I Think what we're seeing a lot of right Now is um because of the maturation of The technology stack in the blockchain And digital assets space um there are Just an abundance of of of new use cases For for this technology coming online And there's growth Behind These use Cases that's that's being fueled um and So that's why you may see larger checks Going to fuel growth as a opposed to um
You know a new idea at Inception and that's very exciting um And very affirming for for the Space so where is VC Capital going right Now what crypto projects are getting the Most attention pitchbook crypto analyst Robert lay told me infrastructure deals Continue to get a significant amount of The money including layer one and Layer Two scaling Solutions he said Applications haven't been gaining that Much traction as of yet but expects Applications to be the next wave of Investments that will come within the Next 12 to 18 months do you agree and Are you seeing the same thing I would Agree with that I think that uh for the First time I feel confident saying um That the infrastructure stack now there Will there will always be upgrades to be Had in in infrastructure and and we see This um in in web 2 software this trend Will repeat and there will all always be Marginal improvements to be made but I Think we're at a place where you can Build real uh you know kind of feature Par applications to to web two on the Web 3 stack and that's extremely Exciting um for for what the future Holds for us we're not so much looking At the next layer one blockchain we will Look at a net new blockchain if that Blockchain presents a new a net new um Use case um so you know something like
Permanent storage um as opposed to a Smart contract blockchain say in the 2017 era you know would have been Something um that we look at um Something uh you know today that that We're looking at are are uh things in in The uh dpin sectors um so using Blockchains as a me mechanism to Coordinate the deployment of physical Hardware uh at scale and really aiming To coll the cost of some of these base Level um services that we take for Granted um such as you know cellular or Or or really Wi-Fi um that's an area That's got us extremely excited um I Think that we're going to see the same Thing in in payments um and we are Seeing that there are trillions of Dollars uh settled in in in stablecoin Uh payments uh yearly and you see some Of the largest companies in the world Really starting to embrace this this te Technology um I think the most telling Is is perhaps PayPal where the company Was really founded um in the early days With the thesis that um they wanted to Be the Internet payment uh company and That was a novel and revolutionary idea At the time you now see them embracing And eclipsing one billion dollars in py USD uh minted and really leaning into The benefits that blockchain technology Has to offer the composability Within Decentral Iz Finance um that's extremely
Exciting um so that's a household name That is is leaning into the space but There are tons of companies that we look At building in and around the payment Space um on a daily basis as well and um That's what's got us excited really Speaking to the incredibly talented mind Share uh uh that is flowing into to the Space Today so for some background for our Viewers CMT digital invested in more Than 150 blockchain and crypto focused Businesses protocols and tokens since 2018 when The Firm made its first Venture investment your investors and Companies including Circle coinbase and Consensus and touching on what you just Said what crypto Investments are you Focused on right now specifically what Is CMT digital looking at yeah Absolutely yeah so um as you had Mentioned Talia we're fortunate to have Uh raised our first Fund in in 2018 Since then we've we've raised uh two Subsequent funds and we're in the midst Of raising our our fourth fund we've had The opportunity to partner with Incredible uh thinkers and and and Builders people that are really pushing The envelope um today yeah I would say Where I spend most of my time is in the Decentralized physical infrastructure Space so how do you coordinate the Deployment of uh physical infrastructure
Via cryptoeconomic incentives how do you Uh create a protocol by which I can and Deploy for example a helium hotspot um In my home uh and provide uh coverage And provably provide coverage and be Rewarded uh via a decentralized Mechanism uh for the provision of of That coverage I think that's an Incredibly exciting design space um both On the application specific Hardware so You know a tailored device like a helium Uh mobile hotspot but also uh the longer Tale of kind of Underutilized um uh call it storage Space or or bandwidth on On Any Given uh Device like the computer that I'm Talking to you from right now um I also Think there's another vein of this kind Of proof of work uh mechanism called Proof of useful work whereby the um Computation involved in um you know Reaching a consensus on a blockchain Network is actually uh useful Um in a derivative function so think About um you know testing algorithmic Innovation um and and if you reach a Break through there you um are not only Uh uh you know bringing consensus to a Network but you're also you know Advancing um uh you know uh field of Computation uh that's that's been quite Interesting uh to us I think uh this Transformation of of finances is Happening I mentioned at the beginning
Of the call this is the most exciting Time that that I've ever invested in the Blockchain and digital assets space um I Think one of the reasons that's really Fueling that that excitement is um you See this genuine Embrace um uh from the Top down of this technology you know It's it it'd be hard to go through you Know a uh a call without mentioning Black Rock and and their movement in the Space in 2024 um I think the most telling uh Statement that that Larry fin has made Is that he he considers the uh Tokenization of assets to be on par with The creation of of ETFs and the ETF Rappers um and he believes that all Financial assets will will be tokenized We we believe that as well um you know We started out with a virtual Representation of the dollar that has Amassed uh billions uh hundreds of Billions um I think close to 160 billion Of in market cap from from stable coins At this Point um and they're settling Again trillions of dollars of value uh Globally I think as that starts to the Efficiencies recognized by unified Ledger start to creep into traditional Finance um we're quickly going to see a World where the marginal dollar um Invested in um you know a corporate bond Or or a um or or another type of Security is is coming from the uh
Blockchain and digital asset space or at Least on those rails As you mentioned CMT digital has three Funds to date and is currently in its Fourth fund targeting 150 million dollar As you're raising for the fourth fund And are in conversations with limited Partners you note that ETFs represent a Quote bullish signal to invest in crypto Funds and that the products present the Perfect opportunity to get retail and Institutional investors looped into Crypto can you elaborate on that how do You think the approval and launch of About crypto ETFs here in the US changed Investor Appetite yeah I think that this is the This is a major stamp of legitimization For the blockchain and and and digital Assets um space I think that once you Fall down the rabbit hole of of Bitcoin And subsequently ethereum and salana and Um and and fall into the crypto um uh World you know you you see people enter The top of the funnel they don't really Come back out and uh and so I think You've you've created a massive um uh Sinkle not just for for dollars but but For mind share for for people to pay Attention to this asset class and the True Innovation that's happening inside Of it um and so these are um perhaps the Uh gateways for uh completely new pools Of capital to to enter at the same time
You have these massive financial Institutions that are offering the ETFs Actively investing in the base Technology itself not not just in the um Uh the wrapper for for Bitcoin or or at This point ethereum exposure um but how Do we apply this this Technology um this revolutionary Technology to our Legacy business um and Upgrade you know to a financial system For the 21st Century now I recently put together Report on the merging of two popular Technologies crypto and Ai and on Friday Coinbase announced the platform Witnessed its first crypto transaction Between AI agents according to architect Partners AI is pulling some investment Dollars away from other Technologies Including blockchain data sent to us From the crypto advisory firm shows that In Q2 of this year AI private Investments totaled more than $40 Billion far surpassing crypto Investments are you also noticing that AI is taking VC dollars away from Blockchain Investments where I where I focus so I Use AI Tools in in my daily processes And everybody at our firm does now and We're actively um automating several of Our our processes um and and it's Impossible not to uh pay attention to The change that's happening um around us
As far as um dollars being pulled from The uh blockchain investment space into The the AI space I think the the most Prominent Trend that I'm noticing is is Actually a a proposition to use um Blockchain rails to potentially control Um or or or be the the payment rails for You know an AI toai transaction like um Coinbase release to press release on This I think that's very very promising Um you know these are uh these large Language models are are Non-deterministic um you can get two Results uh two different results by Asking the the same question you know How do you uh monitor for um Integrity Um consistency and then especially when You introduce you know flows of of of Value um how do you check that a task Actually was was completed um and and You know the automatic release of funds Can can then be kind of provision I Think that there are the the perfect Rails for that are are are blockchain Rails um and and so uh we're actively Looking at and then also you know I Think in its simplest form blockchains Um are an encapsulation of of you know Internet data into an ownership um an Asset that is that is that is ownable in A self- sovereign or individual fashion And um when you think about one of the Main inputs for uh large language models Um it's it's these large swas of of of
Internet data that are that are Originally created by you know us by by The people that that use the internet And and and so um you know rewarding uh Users for their their internet data is Is something that's extremely um Interesting to me I think we're seeing You know incredible Innovation and the u Gkls space and and other kind of data Pipelines that allow us to um you know Create a a real substrate by which you Can you can be um rewarded for for for Sharing your your internet data which is Which is clearly valuable so um I think The marriage of these two spaces will be Very interesting and um I think it plays Very well into what crypto is extremely Uh good at What blockchain mechanisms Are extremely good at Before I Let You Go what's your outlook for VC funding Pitchbook in its Q2 report reported the Third straight quarterly bump do you Think the streak of quarterly bumps and Investment values will continue into the Next quarter especially now that we're Seeing Bitcoin trade well below its Record of more than $73,000 reached back In March how do you think crypto's Performance this quarter will play into Investor interest especially with that Big selloff we saw in the beginning of Last month if at all yeah I think that Over the summer crypto has largely Traded as a um you know as as as one
Kind of unified asset um you know There's not much kind of Differentiation you know maybe the Ethereum and salana all have you know Kind of like a high correlation to to to Bitcoin um and U and really it's it's Kind of determined by the the macro uh Whims and you see you know when Everything kind of correlates to one With the um Carry trade um unwind um and So you know I I think that we we are Going to see um in the 12 months to come A a large kind of disentanglement of the Narratives and individual narratives in The blockchain and digital asset space Really take a hold um you know I'd Mentioned a bunch of them earlier but But payments and deepin are the spaces Where I'm spending a ton of my time and And those are so different from you know The value proposition that Bitcoin Offers and and so um I think that um as We we say at CMT digital that that Blockchain uh technology is an Everything technology it can affect um Uh almost every asset class in every um Industry and we think that um we'll see This disentanglement um in the months to Come and and some really interesting Narratives pop out um from that Disentanglement and we'll see if your Outlook comes to fruition Sam Halen Investment partner at CMT digital thank You very much for your comprehensive
Insight and your time today thanks so Much Talia
