Dragonfly Managing Partner: The Bitcoin L2 Narrative has always been a supply-focused story

Haseeb Qureshi, managing partner of Dragonfly, a venture capital fund for digital assets, says that when you deposit money into the sidechain, you trust the sidechain bridge. At the end of the day, you create some counterparty risk with the participants on the sidechain bridge.
Historically, the early crypto community in China was formed around the Bitcoin mining industry. As a result, most Chinese crypto investors, especially Bitcoin miners, have favored Bitcoin for years. Since Bitcoin's market cap far exceeds that of other cryptocurrencies, it is also not difficult to attract large amounts of money into these projects. As a result, the Bitcoin L2 narrative has been a supply-focused story rather than a demand-focused one. For example, according to Dune Analytics, the largest depositors currently on the Merlin Chain sent more than 500 Bitcoins to the chain. After the initial craze earlier this year, Merlin saw a significant decrease in Bitcoin inflows.
Qureshi adds that a group of bitcoin miners believe that just by putting bitcoins into these bitcoin L2s, they can make a profit, but that doesn't create users. It doesn't create demand or volume. And that's what we really care about.