The Crypto Winter is hitting venture-capital investments early and hard.
- Venture capital (VC) for cryptocurrencies has reduced by 50% in the past quarter.
- “After VC firms poured money into crypto startups during the boom of 2021—peaking at $9.8 billion in the fourth quarter—funding dropped alongside the prices of prominent cryptocurrencies such as Bitcoin and Ether,” says Fortune.
- “Confidence in the industry appears to have wavered after the collapse of high-profile projects such as the TerraUSD algorithmic stablecoin and crypto lender Celsius.”
- Capital has progressively decreased since crypto prices peaked in the fourth quarter of 2021. It ended last year with $9.8 billion, decreasing quarterly to $8.4 billion, $6.6 billion, and $3.3.
Why it’s important
As we previously reported, cryptocurrency is facing a gloomy winter as the value of high-profile coins continues to drop. Bitcoin has lost 69.5% of its value since its peak on November 8, 2021.
The dip hasn’t convinced many crypto firms, who intend to forge ahead. Many are simply changing direction. $3.3 billion in venture capital still affords investors opportunities for expansion and many of them are going into infrastructure, security, and other startups.
“Haun Ventures, founded by former federal prosecutor Katie Haun, launched in March with $1.5 billion. Sam Rosenblum, a partner at Haun Ventures, said that the firm’s funding deployment has not changed, with one exception. While many Web3 investors looked to consumer-facing companies during the bull market, Haun Ventures is now focusing more on infrastructure-focused startups,” says Fortune.
“After the boom of 2021 and the bust of 2022, 2023 likely will be a critical year for startups.”
“Many founders are accustomed to idiosyncratic risk and political, economic, and social instability. A unique opportunity emerges for the impact and potential of Web3 in economies that are struggling with deteriorating monetary systems, major political shifts, and economic opportunity,” says investor Kate Kiewel.
Backing up a bit
As we previously reported, the federal government has begun to heavily crack down on crypto.
The White House has pressured the U.S. Securities and Exchange Commission to further tighten regulations on Crypto in an attempt to crack down on abuse and fraud. Federal Reserve Chair Jerome Powell joined in the criticism too, declaring that stablecoins ought to be more tightly regulated. The Department of Justice to the IRS has authorized actions against individuals who fail to report and pay taxes on their Crypto earnings.
The Fed’s new interest rate hikes have also contributed to a decline in Crypto markets.