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Crypto Weekly

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Venture Capital Firms Already Invest More than $2 Billion into Digital Asset Companies in 2022

Bankman-Fried founded FTX, a crypto exchange, in 2019. This year, it received $800 million in investments.

ƒ No one told venture capital firms, pouring money into digital asset startups, that crypto winter is coming. ƒ Bitcoin and other cryptocurrencies have crashed in recent months, erasing more than $1 trillion in value.

The FTX exchange has already taken in $800 million in investments from cryptocurrency companies this year.

A crypto winter was not announced to venture capital firms. Despite the significant slump in digital asset prices, over $2 billion has been invested in crypto startups this year. Crypto whiz kid Sam Bankman-Fried founded FTX in 2019. After the $400 million raise in late January, the main business was valued at $32 billion. The U.S. arm of the company raised $400 million shortly after that, for a valuation of $8 billion.

Reddit co-founder Alexis Ohanian - and husband of tennis star Serena Williams - has also been active. Last week, he raised $500 million for his venture capital firm, 776, pledging to "double down" on crypto investments. Fireblocks raised $550 million to reach an $8 billion valuation, while Blockdaemon raised $155 million. These smaller investments bring the total raised to over $2 billion in the last month. It's a step in the right direction for the crypto sector at a time when it needs a ray of hope.

Riskier bets have been abandoned in recent months as investors anticipate a Federal Reserve rate hike in 2022 as a way to combat inflation. The price of Bitcoin has fallen over 40% since hitting a record high of $69,000 in November, and as of Friday morning, it was trading at $38,900, up sharply from the previous day. Tokens traded on the Ethereum network fell by a similar amount to $2,860. The combined market value of all cryptocurrencies, according to CoinMarketCap, has fallen from around $3 trillion in November to around $1.8 trillion on Friday. It has prompted talk about a "crypto winter" - a period in which prices remain low for a long time. According to James Malcolm, FX strategist at UBS, “the disconnect shouldn't come as a surprise. VCs focus on a few major infrastructure companies that could gain dominance in the crypto space, whereas individual crypto coins are losing appeal. They can diverge substantially,” he said. “VCs are competing for a limited pool of prime virtual real estate, such as promising digital asset infrastructure, while most coins and protocols face rising competition and macro headwinds. VC concerns, however, are more nitty-gritty: most allocators vastly underestimate the regulatory risks of decentralized finance projects,” he said.

Osprey Funds CEO Greg King says it's still early days in the world of digital assets. "Investing in crypto is comparable to investing in emerging technologies," he told Insider. "We believe that it is difficult to predict which crypto products or applications will win the day." King believes that investment in the crypto space should help cushion the blow during downtimes. “There will be winters coming, but I also think there will be global warming in crypto, so the severity of the winters will decline." 