Venture Capitalists Bet on Blockchain

Venture capitalists are investing in startups in the blockchain and digital currency sectors. PitchBook data reveals that in the first half of the year, VCs spent $17.5 billion on these businesses. Despite a challenging six months for the industry, the data shows a solid optimism in the future of blockchain technology and cryptocurrencies. “I don’t think the current market circumstances scare investors.” according to Roderik van der Graf, the founder of the cryptocurrency and blockchain-focused Hong Kong investment firm Lemniscap. 

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Macroeconomic headwinds and major project failures have reduced the total market value of cryptocurrencies by two-thirds to $1 trillion this year, which has led to bitcoin’s approximate 65 percent decline from its record high of $69,000.

As prices drop, businesses have trembled, resulting in hundreds of job cuts at major U.S. exchange Coinbase Global and NFT platform OpenSea, among others. The waiting period for people asking for financing during the last round was roughly a year. Despite the cryptocurrency devastation, not all investors are so optimistic.

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A downturn from the exorbitant valuations of crypto startups last year is beginning to emerge, according to David Siemer, CEO of the California-based crypto management company Wave Financial.

The concentration of activity was once again on North America, which has historically been the hotspot for VC deals, with $11.4 billion in the six months ending in June compared to $15.6 billion for the entire year prior. Contrastingly, deals in general venture capital (VC) activity in the United States declined to $144.2 billion in the first half as market volatility and macroeconomic uncertainty restrain investment. Data revealed growing confidence in the cryptocurrency and blockchain industries, according to Rumi Morales, director of investments at the significant American VC Digital Currency Group.

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Even while the dramatic changes promised by the technology to sectors like finance and commodities have yet to materialize, the use of blockchain and cryptocurrencies as financial tools mushroomed last year. According to data from the European Investment Bank, venture capitalists invested $2.2 billion in Europe in the first half of the year (IIB). FTX’s U.S. division raised $400 million in January, blockchain developer ConsenSys raised $450 million in March, and stablecoin issuer Circle raised $400 million in April 2022, just a few of the major U.S. crypto acquisitions.

According to one of its founders, Obi Nwosu, “within seven days, we received all of the funding pledges.”

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