According to the CEO and founder of Digital Currency Group (DCG), Barry Silbert, crypto venture capital funding deals have fallen apart in recent months due to the 12-month bear market. Silbert said more than half a dozen crypto VC fundraising deals have collapsed after the leads pulled out in the last month alone.
Also to the DCG CEO, all isn’t well in the crypto investor sector going on to remind that a signed document doesn’t amount to cash in the bank.
Bitcoin (BTC) Price Today – BTC / USD
Terrible Times for Digital Assets
Silbert pointed out that both the bear and bull markets work in similar fashion for venture capital startups. It may be either retail or individual investors. Eric Voorhees the CEO of ShapeShift also explained, that venture capital firms usually tend to leave a market when it is struggling and returns when investments are flooding into the sector, demand, user activity and media coverage.
However, some VC startups including the likes of Andreessen Horowitz, have remained true to their original vision and continued to lead investments during the bear market crash. On the other hand, the majority of VC firms have habitually headed out of the space the moment the market downturn began.
Voorhees echoed that the instincts of the startups tend to be on the good side when the market is up, but they move out when it gets bad.
High Profile Investments Have Been Made to Strengthen Bitcoin’s Position
In the last few months, some high profile VC firms have made a number of significant multi-million dollar investments into crypto startups looking to strengthen the infrastructure around the world’s top digital asset Bitcoin (BTC). For example, Nasdaq and Fidelity Investments, made a whopping $27.5 million funding to finance ErisX, a digital currency exchange and strictly regulated futures market that is based in the United States.
As at the time these investors came in, the CEO of ErisX Thomas Chippas declared that the support from the leading financial institutions is paramount for the long-term progress of the startup. In his words:
“With the increase in financial support from the leading edge firms, our company stands to offer the most robust, regulated and secure digital asset offering available to institutional and individual participants. Completing this second round of funding allows us to continue enhancing our platform and broadening our team.”
The Idea is to Build While its Down
In coming months, the digital asset sector could still keep seeing major VC firms and financial institutions financing the strengthening of the infrastructure around the asset class. After all, virtual currencies represent a relatively smaller market than the actual market capitalization of major banks including JPMorgan.
But, for venture capital startups who play the role of initiating high-risk and high-return investments in developing new markets. The best time to invest is when the market starts to demonstrate signs of a recovery following a large downtrend at a time when the valuation of startups and projects drop massively.
However, while the bear market hasn’t hugely affected all participants in the space, reports indicate that the investment of VC firms in early-stage startups has noticeably slowed down in this year suggesting that the drop in investments in the crypto space may be in correlation with the change in the global VC trend.