Venture capitalists are beginning to move toward crypto once again—buying into the weak market with expectations that it will grow.
- Multiple prominent venture capitalists have told Axios that investors are beginning to join early-stage seed projects, as opposed to late-stage projects already in development.
- These projects include crypto companies like Coinbase Ventures, EigenLayer, Azra Games, and other decentralized finance infrastructure and gaming projects.
- Investors claim the ongoing crypto winter creates investment space for gains during the next bull market.
Why It’s Important
The “crypto winter” has dragged on for nearly a year as the market has experienced cooling, made worse by the collapse of major crypto exchanges and the decline of NFT marketplaces. Even before the collapse of FTX in November, venture capital in the crypto space had dried up 50% in the third quarter of last year.
However, new opportunities have continued to arise, particularly as the crypto market has proven surprisingly resilient compared to the volatility of the U.S. dollar, high inflation, and recession fears. Bitcoin has rallied twice this year amidst the crypto winter and the ongoing banking crisis.
Plenty of venture capitalists remain bullish on the future of crypto, notably ARK Invest CEO Cathie Wood and her proclamation that Bitcoin would hit a $1.5 million valuation within seven years. Investors are looking at the cooling markets and seeing opportunities with new startups and ventures, making small investments in small operations in companies set to improve the quality of or take advantage of the state of the crypto market.
“There has definitely been a shift to earlier [investment] stages, and it seems like the most activity has been at the seed stage,” Blockchain Capital partner Spencer Bogart tells Axios. “This is a notable departure from 18 months ago when we saw a lot of high-profile activity in the mid- to late-stage of the market.”
“Later-stage growth capital is much harder to come by these days as companies need to meet a higher bar in terms of real traction and growth,” Coinbase Ventures Head Shan Aggarwal tells Axios.