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Ella Zhang is in charge of investing $1 billion in blockchain-related businesses, yet her view on the market isn't too keen.
“We’d like the bubble to break,” said Zhang, who joined cryptocurrency trading platform Binance to lead its venture incubator Binance Labs less than two months ago. “We still see a lot of hype in the market, valuations are high and unreasonable. We really think if the bubble bursts, it’s a good thing for the industry.”
Zhang said that while the bull market is positive because it attracts more users, the truly good projects will emerge once the bubble bursts. She’s not making any prediction as to when that will happen. Sales of digital tokens by so-called initial coin offerings have already surpassed the record amount raised in all of 2017, at more than $9 billion. Binance has been one of the biggest winners in this boom as it surged to become the largest cryptocurrency trading platform by volume, according to CoinMarketCap. The company, founded last year in Hong Kong, said in March that it’s moving to Malta after regulators in Asia cracked down on virtual money. Zhang, a former Alphabet Inc. employee and Stanford University business school graduate, says she’s helping Binance do something about the scams that have popped up as a result of the hype, with the so-called Cryptocurrency Governance Initiatives, or CGI. The website for the initiative is set to launch next week.
“The main purpose of this is to fight scams and shit coins, and to boost crypto and blockchain technology,” Zhang said, using a common epithet for teams who sell digital coins to rip off unknowing investors or that haven’t delivered on their promises.
Binance will encourage funds and token teams its working with to join the initiative. Fund managers will have to vow "they won’t participate in pump and dump" schemes, while projects will have to build what they pledged in their white papers, Zhang said. Binance will stop investing and collaborating with funds, and will delist tokens from teams, who break their commitments. The 20 cryptocurrency funds Binance Labs plans to partner with as part of its new $1 billion fund will have to join CGI, Zhang said in a telephone interview from Beijing.
The seven-person Binance Labs team plans to deploy $1 billion from Binance profits in three to five years, with the average investment ranging between $1 million and $10 million. The fund has made four investments so far in both companies’ tokens and equity, which they plan to hold long-term, Zhang said.
Binance Labs’s strategy is to invest in companies focusing on solving problems in blockchain technology: Public blockchains and decentralized exchanges working on increasing transaction speed to tackle scalability, custody, wallet and payment applications with a focus on security and privacy, stable coins creating less volatile tokens, and compliant security token platforms for regulatory concerns.
Some venture capitalists have said there’s a conflict between investing in tokens and equity. Zhang, who was an investment director at venture firm Kleiner Perkins Caufield & Byers for four years, agrees that tokens and equity are valued differently.
“If we see founders contribute to both sides, we’ll hold both sides,” Zhang said. “Sometimes it’s hard to see which one is more valuable, but our position is to support the founders and create value for the project as a whole.”
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