Cryptoverse: What Crisis? Venture capitalists are betting big on Crypto

July 26 (Reuters) – All is not bleak.

Even as the crypto sector shakes through the bleak winter, venture capitalists are pumping money into digital currency and blockchain startups at a pace expected to surpass last year’s record highs. .

In the first half of the year, VCs bet $17.5 billion on these companies, according to data from PitchBook. This met investments on track to surpass the record $26.9 billion raised last year, a warmer and happier time for bitcoin and co.

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“The current market conditions – I don’t think they are deterring investors,” said Roderik van der Graf, founder of Hong Kong-based investment firm Lemniscap, which focuses on crypto and blockchain. “The capital available is huge.”

Venture capital funds provide financing to young companies that they believe have strong growth prospects. Responsible Data has strong faith in the future of crypto and blockchain technology, despite six deadly months for the industry.

A double whammy of macroeconomic headwinds and blowouts in major projects this year has seen bitcoin tumble about 65% from its November all-time high of $69,000, with the total crypto market capitalization falling by two-thirds to $1 trillion.

Companies have been reeling as prices fall, with major U.S. exchange Coinbase Global ( COIN.O ) and NFT platform OpenSea among those laying off hundreds of workers.

Yet some VCs are ignoring the gloom, with many deploying significant war chests as their faith in the underlying cryptocurrency technology remains strong.

Although not all investors are so optimistic about the crypto carnage, by no means.

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

“It’s getting worse – we’ve been in this cycle for a few months. In the last cycle, the pain for those seeking funding was about 12 months.

AMERICAN HOT SPOT

North America, long a hot spot for venture capital deals, was again at the center of activity with about $11.4 billion in the six months to June, down from $15.6 billion for all of last year.

The figures contrast with general venture capital activity in the US, where deals fell to $144.2 billion in the first half of the year from $158.2 billion in the same period last year. Read more

Rumi Morales, chief investment officer at Digital Currency Group, a major US crypto investor, said the data reflected growing faith in the crypto and blockchain industry.

“Before, there was an existential risk in the space – that the entire industry was just going to disappear, it was all just a dream. This is no longer the case.

The adoption of crypto as an investment tool has grown in the past year, with the use of blockchain also gaining traction – although revolutionary changes in the technology promise industries such as finance and materials, where the former remains elusive.

Among the US crypto mega deals in 2022: $400 million raised by the US branch of 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 is also strong in Europe, with $2.2 billion in venture capital investments in the first half of the year.

Lisbon-based Fedi, an app designed to help people receive, hold and top up bitcoin, said this month it had raised $4.2 million in seed funding.

“Within seven days we had all investment commitments,” Obi Nwosu, one of its founders, told Reuters. “And within a month and a half we had the first fundraising goal in the bank. It’s done.

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Reporting by Tom Wilson in London and Medha Singh and Lisa Pauline Mattackal in Bengaluru; Assembly Pravin Char

Our standards: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reject the opinions of Reuters News, which is bound under the principles of trust to respect integrity, independence and freedom from bias.

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