Web3 Investor Briefing | Feb 2025

Welcome to the very first issue of our new newsletter for investors, which will provide a window into the exciting developments happening across liquid crypto markets, venture capital, and the cutting-edge realm of staking infrastructure.

In each issue, you'll hear directly from our three Partners/Co-Founder, each bringing their unique expertise and insights to the forefront:

• Julius Nagel at w3.wave, our liquid fund, where he navigates the dynamic crypto markets to uncover early-stage liquid token opportunities.

• Henrik Bredenbals at w3.ventures, our venture fund, where he focuses on identifying and investing in early-stage startups working on the Web3 application/consumer layer.

• Tom König at w3.labs, our Web3 Staking & Infrastructure company, where he explains the latest developments in staking technology and infrastructure, offering insights into how the backbone of the decentralized web is being developed.

We’re excited to have you along for the journey as we ride towards a more open, transparent, and community-driven digital future. We will always start with a macro market view, described through the Fear and Greed Index below. After that, we dive into the different topics of the month!

At w3.wave, we generally have a positive outlook for 2025, even though this year will undoubtedly come with its own unique challenges. While many are forecasting a “perfect storm” or even a “supercycle” for crypto markets, we rather remain optimistic about several sub-sectors and want to share key areas we’re closely watching in 2025.

1 | Macro is King

Macroeconomic trends set the pace for crypto markets. As a risk asset class, crypto heavily depends on liquidity in the financial system. This year, we’ll be watching the Trump administration’s impact on U.S. economic growth, inflation, and the strength of the U.S. dollar. The interplay between these factors and global liquidity flows will likely shape market dynamics in 2025.

2 | Bitcoin as a Reserve Asset

2024 brought two monumental waves of Bitcoin adoption: ETF flows and the so-called “Trump trade”. Now, all eyes are on a potential new driver for Bitcoin and the broader crypto market: Strategic Bitcoin Reserves (SBRs).

What will this actually look like?

• What nation states will be first movers and to what extend will they acquire Bitcoin?

• What will we see proposed as the so-called "strategic cryptocurrency stockpile" in the U.S?

While we do not expect nation-states or central banks to step in and buy Bitcoin immediately, the ongoing discussion displays the continuious adoption of Bitcoin as a form of "digital gold".

3 | DeFi Innovation & Growth

We’ve been fortunate to witness DeFi’s evolution – from concept to hype, to maturity – over the last few years. In 2024, standout projects like Fluid, Ethena, Pendle, Hyperliquid, Jupiter, and Morpho reshaped how we think about DeFi, and we’re excited to see their KPIs grow in 2025.

Constant innovation from some of the best founders in crypto leaves us optimistic about the future of DeFi.

4 | AI & Agentic Networks

Over the past 18 months, AI has driven excitement in financial markets, and it was only a matter of time before this enthusiasm reached crypto. From decentralized compute and storage markets to the Bittensor ecosystem and the rise of agentic networks, we’ve seen significant growth in the crypto x AI space.

As investors, we’re bullish on this intersection for two reasons:

• Exponential advancements in AI will fuel constant experimentation and innovation in crypto.

• There’s no natural cap on the valuation of AI-crypto protocols, which fosters speculative capital flows in search of potential “100x” opportunities.

5 | Decentralized Physical Infrastructure (DePINs)

2024 marked a shift for DePINs – from initial excitement to actual adoption and growth. As these networks gain traction across various verticals, we’re keeping a close eye on innovation and real-world application. 2025 promises positive surprises in this space.

While crypto markets remain as dynamic as ever, we’re optimistic about what’s ahead.

The time for applications is here

If you’ve been following us, seen our website, or track our investments, you know our focus always has been the application layer of crypto and it was our strong-held believe that we are at a point where actual and useful applications will emerge. This thesis has started to be proven right in 2024 and in our opinion will continue to play out. Just think about Polymarket and the US elections being featured in major US media as a source of truth – or at least another gauge of public opinion and available data points. Interestingly, by doing so Web3 is following the same cycles as Web2, as you can see in the graphic below.

The real MOAT of a chain is its users

If you are using an application in Web3 today, do you really care what chain it lives on? Chains have become almost interchangeable, at least in a technological sense. They used to hold all the power in the market, but that dynamic is changing and has reached a tipping point in 2024. We're still in the early stages, and applications are massively undervalued compared to protocols, but we can see a trend emerging. This shift signals a new era of influence for apps as they attract users with innovative use cases, making the survival of a chain increasingly dependent on them.

What Factors are Beneficial for Applications Right Now?

The technology to build useful apps

The technology to build useful apps, such as Private Keys via Biometrics, social logins (e.g., via Google), and chain abstraction tools, are huge technological enhancements enabling developers to build apps that are not only useful but also have a reasonably seamless user experience.

A Change in Perspective

Even major blockchains are now realizing the value of applications for them, as without applications and therefore users, a blockchain is nothing—similarly to a country without GDP and people. This is playing out as chains focus on community and brand building, organize hackathons where app building is incentivized, and try everything to make their blockchain the best place to build apps.

Actual Innovation is Happening

While there was a time in crypto when innovation meant another fork of Uniswap was dropping, we are now seeing actual innovation taking place. Just look at the DePIN sector, the AI agent innovation, or the DeFi sector, which is having its own renaissance. At the same time, there is a new cohort of (mobile) apps coming, lowering the barrier of entry and enabling new use cases. One example to name here is Plug. It is a no-code platform for automating on-chain activities across different protocols, allowing users to specify their goals (e.g., maximizing yield), which Plug efficiently executes. Compared to traditional DeFi, where users have to perform multiple checks and steps across different protocols on their own, this completely changes the game by being an application that leverages those protocols for the user.

Financial Use Cases Without Speculation

For a long time, speculation was the major use case of crypto, but we are now seeing actually useful financial applications emerge, enabling users to take their financials into their own hands. These applications are earning revenue in a highly efficient way and are redistributing a big share of it to their users, compared to Web2 applications, where big corporations are taking the revenue completely for themselves. This alone will be a huge driver of the Web2 to Web3 migration.

We Are Excited…

…to see this further play out and to take an active role in the funding of these new applications. We are entering a phase of the market where on the one hand, many new projects emerge and it’s important to keep a cool head and focus on due diligence, but on the other hand, some of these projects will reshape the way in which we are using technology in the next years.

The Ethereum Validation Paradox

Ethereum is the preeminent platform for open and decentralized applications, with an extensive history of securing assets in decentralized finance (DeFi). It has gained further credibility by serving as the host for tokenized assets from prestigious institutions such as BlackRock, and is one of the two digital assets that can be purchased by exchange-traded funds (ETFs) in the United States. The staggering $60 billion in value secured on the Ethereum chain is a testament to its reliability.

ETH Staking Offers One of the Most Secure Yield Opportunities, Yet Most Have Been Hindered from Participating

As an individual, business, or asset manager, you could essentially own a toll booth on the highway of the future decentralized internet. However, current regulations are either limiting your involvement or pushing you towards centralized providers. This is understandable, as there are several pitfalls associated with staking as a business or individual.

Why Ethereum Staking is Uncommon in Germany?

The legal framework for staking in Germany presents several potential challenges, such as:

• Accumulation of substantial tax liabilities in a volatile asset. Staking rewards accrue daily, potentially creating a new taxable event each day. If the taxable portion of the rewards is not sold each time, you can accumulate a significant tax liability.

• Lack of proper documentation from providers to accurately file taxes. Many staking providers simply offer their platform "as is" without providing customers with the necessary documentation for tax purposes.

• Purchasing a liquid staking token can be a taxable event. Imagine you have held your ETH for less than a year and now want to stake it. If you choose to purchase a Liquid Staking Token to do so, you might be creating a taxable event. If you have held your ETH for more than a year, you could be resetting your holding period and can only sell it tax-free after another year.

Other staking providers do not seem to prioritize addressing these issues for their users, and why should they? They are comfortable with their stakes through international staking platforms. They are not headquartered in Germany, they do not provide the necessary documents for you to file your taxes correctly, and they are not even allowed to advertise to German customers. Luckily for you, there is a staking provider that cares!

How w3.labs Solve This

We created w3.labs because we recognized this gap in the market and had significant experience in staking for family offices, institutional clients, and navigating these pitfalls. Now we are ready to offer you our solution that implements all of this in one frictionless experience!

We provide you with an easy-to-use platform and high-quality infrastructure under the hood to enable you to stake Ethereum seamlessly! We also provide you with a compliance framework that allows you and your business to comply with all necessary regulations with peace of mind.

You will find a taxable profit calculator, tax exports, and a compliance library with documents and reminders, so you can focus on your Digital Asset Strategy. We also equip you with a Digital Asset Officer and Digital Asset Workshops, where we can shape your strategy together 🤝

This sounds interesting no? You can always reach us via the following form.

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