VC Concerns Rising Over Sustainability of High Valuation in Crypto Industry: Bloomberg

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In the first quarter, the crypto sector experienced several financing events as the cost of Bitcoin and other digital currencies surged noticeably. The launch of a Bitcoin ETF in the United States drew significant investment and global interest, leading venture capitalists to consider jumping on the bandwagon. However, they exercise caution due to uncertainties surrounding the longevity of rising evaluations.

Kris Marszalek, CEO of Crypto.com, expressed concern over the long-term viability of skyrocketing prices in the crypto industry as reported by their venture capital division.

Crypto Fundraising and Scaling Back by Crypto.com Capital

Over the last 18 months, Crypto.com Capital, the venture capital branch of cryptocurrency exchange Crypto.com, has scaled back its investment efforts due to the bear market, according to Bloomberg’s reports. Instead of actively investing during the crypto market’s recent recovery, the VC firm has chosen a more cautious stance and is carefully observing the situation.

Kris Marszalek expressed that currently, proposed valuations from project teams seem excessively high to us in pursuit of a satisfactory financial gain.

Over the past 18 months, Crypto.com Capital has reduced its investment in crypto startups by $500 million. According to Dealroom’s data, there have only been four investments made by Crypto.com Capital since 2023, whereas previously they had invested in 35 different startups before that year.

In March 2024, venture capitalists allocated more than half (52%) of their investments towards crypto initiatives. A significant portion of this funding was directed towards projects focusing on crypto infrastructure and decentralized finance (DeFi). The first quarter of 2024 saw a substantial rise in venture capital investment in crypto startups, reaching an impressive $2.5 billion. This represents a notable 32% increase compared to the previous quarter, as reported by CoinGape.

Crypto Valuation Challenges

Some investors who put money into venture capital funds are becoming wary, as there appears to be renewed excitement in the industry despite serious apprehensions. Meanwhile, other investors, known as limited partners, are hesitant to commit additional funds until they see clear signs of profit from these funds.

Andreessen Horowitz, a prominent venture capital firm based in Silicon Valley, revealed its intention to amass approximately $6.9 billion for fresh investment pools, which will include two funds dedicated to artificial intelligence (AI). However, the company has decided to hold off on designating funds for cryptocurrency at this time.

C crypto.com Capital has put large sums of money into various initiatives focusing on blockchain technology and digital assets, including projects like Berachain and Merkle Manufactory.

Currently, the cost of Bitcoin is being exchanged below resistance at $63,574. This comes after it reached a record peak of $73,750 in March. The cause for this downward trend can be attributed to broader economic conditions, geopolitical tensions, and technical indicators.

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2024-04-17 11:43