Cryptoverse: What crisis? Venture Capitalists Bet Big on Cryptocurrencies

A stock chart is seen with a depiction of bitcoin in this illustration taken on March 13, 2020. REUTERS/Dado Ruvic/

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July 26 (Reuters) – It’s not all pessimism.

Even as the cryptocurrency industry shivers through the 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, VCs bet $17.5 billion on these companies, according to PitchBook data. That puts the investment on course to surpass last year’s record $26.9 billion, a warmer and happier time for bitcoin and company.

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“Current market conditions — I don’t think that bothers investors,” said Roderik van der Graf, founder of Hong Kong investment firm Lemniscap, which focuses on crypto and blockchain. “The capital available is huge.”

VC funds provide financing to young companies that believe they have strong growth prospects. The data suggests solid faith in the future of cryptography and blockchain technology, despite a bruising six months for the industry.

A double whammy of macroeconomic headwinds and explosions in major projects this year sent bitcoin plummeting about 65% from its November record high of $69,000, with the overall cryptocurrency market cap dropping by two-thirds to $1. trillion.

Companies shuddered as prices plummeted, with major US exchange Coinbase Global (COIN.O) and NFT platform OpenSea among those laying off hundreds of workers.

However, some VCs are shrugging their shoulders, with many deploying substantial war chests as their faith in the underlying technology behind cryptocurrencies remains strong.

While not all investors are so optimistic about the carnage of cryptocurrencies, by no means.

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

“This is going to get a lot worse – we’re a few months into this cycle. Last cycle, the pain for those seeking funding was about 12 months.”

AMERICAN HOTSPOT

North America, long the hotspot for venture capital deals, is back in focus with about $11.4 billion in the six months to June, up from $15.6 billion across the board. last year.

The numbers contrast with overall venture capital activity in the United States, where deals fell to $144.2 billion in the first half from $158.2 billion in the same period last year, due to macro conditions and the market turmoil. see More information

Rumi Morales, chief investment officer at Digital Currency Group, a large American VC, said the data reflects an increasingly robust faith in the cryptocurrency and blockchain industry.

“There used to be existential risk being in space – that the whole industry was going away, it was all a dream. That’s not the case anymore.”

The adoption of cryptocurrency as an investment tool has grown rapidly over the past year, with the use of blockchain also gaining ground – even as the revolutionary changes in technology promised to industries such as finance and commodities remain elusive.

Among the US cryptocurrency mega deals in 2022: $400 million raised by the US arm of cryptocurrency 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 spend bitcoin, said this month that it has raised $4.2 million in seed funding.

“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 our initial fundraising goal at the bank. Done.”

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Reporting by Tom Wilson in London and Medha Singh and Lisa Pauline Mattackal in Bangalore; Editing by Pravin Char

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, in accordance with the Trust Principles, is committed to integrity, independence and freedom from bias.

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