Polkadot and Kusama prices rose as Master Ventures announced a $30 million Polkadot ecosystem fund

By Selena On Jun 3, 2021

Polkadot (DOT) and Kusama (KSM) rallied together today as traders began eyeing a large investment by a venture capital firm into their Blockchain ecosystem.

It’s finally happening…

The Master Ventures Polkadot VC Fund is the first of its kind.

Learn more about the fund and how we plan to invest in promising projects vying for #parachain slots on @Polkadot and @kusamanetwork. https://t.co/8xcsjTdk4u

— Master Ventures (@master_ventures) June 2, 2021

Polkadot (DOT) and Kusama (KSM) skyrocket in price after attracting $30 million in funding

Master Ventures is an Asian blockchain incubator and professional venture capitalist. They recently announced that they will be launching a $30 million venture capital fund called Master Ventures Polkadot VC Fund. In a press release published Wednesday, the company shared that its fund will support and fund Parachain bids of tier-1 blockchain projects that want to win a Parachain spot on the Polkadot Relay Chain.

Master Ventures also emphasized that the proceeds will be used to support early-stage projects in the launch of Polkadot and Kusama ecosystems. Traders consider this announcement a bullish signal for the DOT and KSM pairs. Their sudden interest sent the DOT/USD pair up as much as 27.91% to $29.21. Meanwhile, Kusama’s KSM/USD rose 39.35% to $511 during the same period.

In addition, Master Venture’s $30 million investment in the Polkadot ecosystem will lead to faster auctioning of “Parachain positions”. In retrospect, Parachain is equivalent to a blockchain (layer 1) tied to a specific function, with its own specialized characteristics and governance structure.

Meanwhile, Kusama is an experimental version of Polkadot but exists as a standalone blockchain. The network acts as a sandbox for developers who want to test pre-release versions of their projects before deploying them on the Polkadot mainnet.

Potential Demand for DOT and KSM

Developers bidding for Parachain positions on Polkadot and Kusama will need to use DOT and KSM tokens. And as Master Ventures’ $30 million funds intend to fund developers as well as their tier-1 projects, that also means the venture capital firm will need to buy DOT and KSM to back the Parachain auction’s bids. In return, Polkadot and Kusama will lock tokens when developers want to run their projects on their parachains. The token lockup period is at least six months to two years.

If the Polkadot ecosystem is successful, the number of locked DOT and KSM tokens will always increase. As a result, the total supply in circulation will gradually become scarce. That could partly explain why traders suddenly changed their attitude towards DOT and KSM.

Mira Christanto, a researcher at crypto data analytics firm Messari, shared that 65% of the DOT supply has been staked. Meanwhile, 30% DOT is still in circulation. As a result, the upcoming Parachain auction will put more Polkadot tokens out of circulation. Conversely, lower voter participation in Polkadot and Kusama’s Parachain auctions could lead to lower-than-expected demand for DOT and KSM, risking a price correction in the spot market.

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