[inthewoods]

I think that if you have free/easy money, with low risk of a meaningful downside (e.g. going to jail), and there is increasing competition from other VCs with access to the same money, then you greatly increase the risks you're willing to take. It's a game of homeruns, not singles.

So to answer your question, I think this is way they think: "If this goes wrong, I don't have any real personal skin in the game, and there are a bunch of smart people at other firms that are putting their money in. I better be in because if I don't allocate this capital it goes away. And if I miss a big one, that's worse than losing."

[ghaff]

And, while FOMO is often presented as an anti-pattern, another way of framing the same thing is that if everyone else thinks X is the hottest thing since sliced bread and I'm skeptical... Who am I to be so certain that I'm the smartest guy in the room?

Add the complexities of timing. In fact, even if you thought crypto (or various stocks) was bullocks, you could have made a whole lot of money if you got in and out at the right time.