VC Concerns Rising Over Sustainability of High Valuation in Crypto Industry: Bloomberg
Highlights
- Crypto venture capital firms remain cautious of the sustainability of rising valuations in the crypto industry.
- Crypto.com Capital joins others such as a16z to pull back investment activity this year.
- Limited partners reluctant to pour in more money until venture funds start showing tangible returns.
Crypto industry saw a number of funding rounds in Q1 amid a noteworthy uptick in prices of Bitcoin and other cryptocurrencies. With U.S. spot Bitcoin ETF recording substantial buying and grabbing major attention globally, venture capital firms eyeing a piece of the growth but remain cautious of the sustainability of rising valuations.
Crypto.com chief executive officer Kris Marszalek revealed their venture capital arm is dubious about the sustainability of surging valuations in the sector.
Crypto Fundraising and Scaling Back by Crypto.com Capital
Crypto.com Capital, venture capital arm of the crypto exchange Crypto.com, pulled back its investment activity over the past 18 months amid a bear market, reported Bloomberg. The VC firm took a stay-back-and-look approach despite a crypto market recovery.
Kris Marszalek said “We want the financial return. At this moment, valuations being thrown around by project teams are very generous.”
Crypto.com Capital had invested $500 million into startups in the crypto sector, scaling back investment activity over the past 18 months. Dealroom data revealed four Crypto.com investments since 2023 as compared to a higher number of investments of 35 before 2023.
Venture capitalists invested over 52% into crypto projects in March, with the majority going into projects related to crypto infrastructure and decentralized finance (DeFi). Venture capital investment in crypto startups surged to an impressive $2.5 billion in the first quarter of 2024, marking a notable 32% increase from the previous quarter, as reported by CoinGape.
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Crypto Valuation Challenges
Some capital partners that provide capital for venture funds are skeptical due to hype bubbling back into the industry, which seems to be higher despite significant concerns. Limited partners are reluctant to pour in more money until venture funds start showing tangible returns.
Silicon Valley venture capital giant Andreessen Horowitz announced plans to raise $6.9 billion for new funds, including two AI-focused funds. But the firm said it has postponed allocating funds for crypto.
Crypto.com Capital invested millions into blockchain and digital assets-related projects such as Berachain, Merkle Manufactory, and others.
Bitcoin price is currently trading under selling pressure at $63,574 after hitting a new all-time high of $73,750 in March. The underlying weakness is due to macro, geopolitical, and technical charts.
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