What crisis? Venture capitalists bet a lot on cryptocurrencies

Even as the cryptocurrency industry is shaking in a bleak winter, venture capitalists are pouring money into digital currency and blockchain startups at a pace that is expected to surpass last year’s record.

In the first half of the year, venture capitalists invested $ 17.5 billion in these companies, according to data from PitchBook. This allows investments to break the record of $ 26.9 billion raised last year, a warmer and happier time for bitcoin and others.

“Current market conditions: I don’t think they scare investors,” said Roderik van der Graf, founder of Hong Kong-based investment firm Lemniscap, which focuses on cryptocurrencies and blockchain. “The available capital is enormous”.

Venture capital funds offer financing to young companies that they believe have strong growth prospects. The data suggests strong confidence in the future of crypto and blockchain technology, despite a deadly semester for the industry.

Macroeconomic headwinds and major project failures this year have sent bitcoin down about 65% from its record of $ 69,000 in November, and the overall value of the cryptocurrency market has fallen by two-thirds to reach $ 1 trillion. .

Companies have trembled in the face of falling prices, with major US exchange Coinbase Global and NFT platform OpenSea among those firing hundreds of workers.

Yet some venture capitalists are shaking off the darkness and many are deploying major war chests as their faith in the technology behind cryptocurrencies remains strong.

But not all investors are so optimistic about the cryptocurrency carnage, far from it.

David Siemer, CEO of California-based cryptocurrency management firm Wave Financial, said there were signs of a pullback from the skyrocketing ratings of cryptocurrency companies last year.

“It will get much worse: we have gone from a few months to this cycle. In the last cycle, the pain for those seeking funding was about 12 months.”

THE AMERICAN HOTSPOT

North America, which has long been the hotspot for venture capital operations, was again the focus of activity with around $ 11.4 billion in the six months to June, up from $ 15.6 billion. dollars for the whole year.

These figures contrast with general venture capital activity in the United States, where business fell to $ 144.2 billion in the first half of the year from $ 158.2 billion in the same period last year. Macroeconomic conditions and market turbulence cooled investment.

Rumi Morales, chief investment officer of Digital Currency Group, a leading US VC, said the data reflects growing confidence in the cryptocurrency and blockchain industry.

“There was an existential risk in space – that the whole industry was about to disappear, that it was all a dream. It’s not like that anymore.”

The adoption of cryptocurrencies as an investment tool has exploded in the past year, with the use of blockchain also gaining momentum, although the revolutionary changes in technology promised to sectors such as finance and commodities remain elusive.

Among the US cryptocurrency mega deals in 2022: $ 400 million raised by the US branch of the cryptocurrency exchange FTX in January; a $ 450 million fundraiser from blockchain developer ConsenSys in March; and $ 400 million raised by stablecoin broadcaster Circle a month later.

Activity is also strong in Europe, with $ 2.2 billion in venture capital investments in the first half of the year.

Fedi, a Lisbon-based app designed to help people receive, hold and spend bitcoins, said it raised $ 4.2 million in initial funding this month.

“In seven days, we had all the investment commitments,” Obi Nwosu, one of its founders, told Reuters. “And in less than a month and a half, we had the initial goal of raising funds in the bank. It’s done.”

Leave a Comment