While many are still reeling from the collapse of LUNA, UST, and the crypto market as a whole surprisingly that has not halted venture capital funds (VCs) from pouring money into crypto firms. In the stock market at least investors have been moving into more value stocks and away from high growth high-cost stocks that have fueled the market over the last few years. In crypto with the prices down so much and so many individuals, underwater logic would dictate that people would avoid pouring more money into these areas as the people participating here are hurting.
According to a Wall Street Journal article from yesterday though that is not the case. While they mention a few different firms they highlight Toronto-based Round 13 Capital. Round 13 Capital announced on Thursday they had raised $70 million to invest in blockchain companies and already had reached deals with 6 different companies deploying $15 million in the process. That’s not too shabby with these current conditions as I am honestly surprised to even be reading a story about this at all! That is not to say that the market has been kind to some of Round 13’s investments as co-found Khalid Verjee has said that valuations are about 10% lower now than they were at the beginning of the year.
The Wall Street Journal article also gave us the 2022 first quarter or Q1 stats for VC’s in blockchain/crypto. Venture Funds focused on crypto raised a whopping $11.92 billion similar to Q4 of 2021. This money has not taken long to be deployed either as Crypto and blockchain startups raised $9 billion in the quarter. Compared to traditional finance this money is being deployed at light speed. When firms traditionally raise the money they slowly parse it out to companies and it takes a year or so for all the money to even be deployed but that has not been the case with crypto!
Since each quarter is 3 months long we are currently in the middle of the second quarter and so we are starting to get the data from the beginning of the quarter. As we should have all expected the amount invested has decreased but even with the decrease the sector has raised $3.9 billion. Rounding this up to $4 billion to make math easier would mean for the full quarter roughly $8 billion would be raised. Now, this is a far cry from $11.92 billion and again simplifying for easy math means the quarter-over-quarter results are down 1/3 or 33.33%. When we compare this though to crypto prices though ETH in Q1 was at $3,400 and has fallen to $1,900 representing a $1,500 drop or 44% in value. So while the value of the biggest smart-contract blockchain fell 44% inflow only fell 33% which to me signals that these investors are not near as worried about these investments.
Now there is still plenty of time in Q2 for things to change but I see this as a pretty big win for the industry since the results could have been a lot worse. This year, up until the last couple of weeks, crypto had just been moving sideways in a certain range. There were no sustained increases or decreases which is something that gives investors in traditional investments like stocks pause. If a stock is going up a traditional investor might pile on more cash thinking it will continue and if it falls they might further invest to dollar-cost average down! Since crypto did not do either of these it is pretty impressive that the investments continued as they did.
It is really great to see money continue to get poured in regardless of the market environment for one huge reason. It means there are enough people and wealthy people at that who really do believe that blockchain is the next big thing and believe they are still getting in early. We have been able to see this trend happen with workers in the industry leaving companies like Google, Microsoft, etc., and joining DOA’s, Web3, or other blockchain projects. This is really helping facilitate a great base. As long as funding levels remain strong as they have been the short-term outlook for the industry remains in great shape! If levels do drop though it will shift back toward a long-term approach.
Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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