Without a strong stomach and willingness to hold onto tokens for the long term, it's not yet safe to invest in Web3, the legendary venture capitalist warned.
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Web3 investors had better be ready for a rough ride, according to legendary tech investor Fred Wilson.
With venture investors becoming more selective, he predicted "Web3 will go through a triage of sorts in 2023" — and only the strong projects and protocols will survive and thrive. The Union Square Ventures co-founder's bets over the decades have included Twitter and Coinbase.
While he was speaking mainly to the venture capital community in a Jan. 1 post on his AVC blog, Wilson's advice has relevance for retail crypto investors as well.
Like startups in general this year, Wilson said:
"Projects and protocols that have found product market fit, have real token economics, and ship new features quickly will attract new interest and rise in value. But many Web3 projects have not found product market fit, have weak or no token economics, and do not execute well and I think we will see many of them continue to flounder and fail in 2023."
More Pain Coming
Beyond that, Web3 projects are facing stronger headwinds with insolvent projects struggling to restructure and investment funds "so far under water that they may be forced to liquidate," he warned.
As a result, tokens will face "ongoing sell pressure… for at least the first quarter of 2023 and maybe for much longer," he said.
On the plus side, Wilson said he believes large-cap tokens, notably Bitcoin and Ether, will continue to attract investors and do well.
That's especially true for ETH, which "has the best underlying economic model of any Web3 asset," according to Wilson. He said:
"While there are compelling values out there in Web3, I am not convinced that it is safe to go back into the water just yet unless you have a very strong stomach and a very long time-horizon."