It’s not all doom and gloom.
Although the crypto sector is reeling from a gloomy future, venture capitalists are pouring money into digital currencies and blockchain startups at a pace that will surpass last year’s record.
In the first half of the year, VCs bet $17.5 billion on the company, according to data from PitchBook. That puts the investment on course to top the record $26.9 billion raised last year, a warmer and happier time for bitcoin and co.
“Current market conditions – I don’t think they faze investors,” said Roderik van der Graf, founder of the Hong Kong investment company Lemniscap, which focuses on crypto and blockchain. “There’s a lot of available capital.”
VC funds offer financing to young companies that are believed to have strong growth prospects. The data shows strong faith in the future of crypto and blockchain technology, despite a bruising six months for the industry.
A double blow of macroeconomic headwinds and blow-ups in major projects this year has seen bitcoin plummet about 65% from the November record of $69,000, with the overall value of the crypto market tumbling by two-thirds to $1 trillion.
The company has shuddered as prices fall, with the main US exchange Coinbase Global and NFT OpenSea platform among those to lay off hundreds of workers.
But some VCs ignore the gloom, with many using their war chests as important because their faith in the underlying technology behind crypto coins remains strong.
While not all investors are bullish in the face of crypto carnage, not by any means.
David Siemer, CEO of California crypto management firm Wave Financial, said there are signs of a pullback from last year’s peak crypto company valuations.
“It’s going to get worse – we’re a few months into this cycle. In the last cycle, the pain for people looking for funding was about 12 months.
North America, long the hotspot for VC deals, has again focused activity with about $11.4 billion in the six months to June, versus $15.6 billion for the whole of last year.
These figures contrast with general VC activity in the United States, where deals fell to $144.2 billion in the first half of the year from $158.2 billion in the same period last year as macro conditions and market turmoil cooled investments. read more
Rumi Morales, investment director at Digital Currency Group, a major American VC, said the data showed stronger faith in the crypto and blockchain sectors.
“There used to be an existential risk in that place – that the whole industry would disappear, it was all just a dream. It’s not like that anymore.”
The adoption of crypto as an investment tool mushroomed last year, with the use of blockchain also gaining ground – although the revolutionary changes of the promised technology for industries such as finance and commodities remain elusive.
Among US mega crypto deals in 2022: $400 million raised by US crypto exchange FTX in January; a $450 million fundraising round by blockchain developer ConsenSys in March; and $400 million raised by stablecoin issuer Circle a month later.
Activity was also strong in Europe, with VC investment of $2.2 billion in the first half of the year.
Lisbon-based Fedi, an app designed to help people receive, hold and spend bitcoins, said this month it had raised $4.2 million in seed funding.
“In seven days, we have all investment commitments,” Obi Nwosu, one of the founders, told Reuters. “And in less than a month and a half, we had our initial fundraising target in the bank. Done.”