Despite increased market volatility, crypto investors continue to invest in Web3 startups, with Billions invested in over 100 companies.
So far, 2022 has seen increased venture funding within the crypto space despite spiralling prices and the threat of a bear market. Data from Delphidigital suggests that February saw the highest number of the financing to date, with a total of 182 deals takings place.
Web3 Projects Receive Lionshare Of Investments
According to the data, Web3 investments were the most popular, accounting for the bulk of the capital that flowed in February. However, in March, Infrastructure investments appeared to be picking up pace, as the number reached 36, the highest number in a year.
Source: Delphidigital.io
From the chart, it is clear that VC investment in crypto became more prominent in march 2021. In the preceding months, the number of deals fluctuates between 60 and 35, never exceeding the former.
However, March 2021 saw a significant spike in the number of crypto funding, jumping from near 60 to over 140. The number dropped steadily over the following months reaching 80 in July 2021 before steadily rising and hitting February’s all-time highs.
Accordingly, several large institutional investors have continued to get skin in the game through raised funds. This confirms the sentiment that they have remained long term bullish, despite the continuous downward spiral of prices. Citadel Securities, Luna Foundation Guard, and Fireblock have raised the most money this year, raising $1.15 billion, $1 billion, and $550 million, respectively.
Therefore, various sectors of the industry have received the funds generated. These include DeFi, Web3, NFTs, Infrastructure, and CeFi. However, with the possibilities of a crypto winter on the deck, VC firms have started to target early-stage crypto investments.
Volt Raises $50 million Amidst Market Carnage For Crypto Start-up
Volt Capital, a Crypto-native venture firm, recently launched a $50 million fund for early-stage crypto investments. According to Soona Amhaz, the funds would be used to support infrastructure, DeFi, NFTs, and DAOs at the pre-seed and seed investment stages.
The investment comes when prices slumped, and general interest in the crypto space has declined significantly. Nonetheless, Amhaz believes that there is no better time to double down on investing in the ecosystem. She reiterated that the current atmosphere is the perfect climate fo early-stage investments.
The crypto Price innovation cycle. Source: a16z.com
Interestingly, Volt’s stance on early-stage investing is backed by a price innovation cycle thesis from one of its fund’s backers,a16z. The hypothesis posits that the crypto market is driven by a cycle where high prices attract significant interest, bringing in talent. Eventually, when downturns occur, developers seek new ideas and then innovate. This leads to new projects and ideas that then drive up optimism again.
This hypothesis has been proven true in the last bear market between 2018 and 2020. Thus, Volt is hoping to drive innovation in the space with its fund even as the market experiences a winter of sorts.
Currently, global headwinds have significantly impacted the financial markets making it very difficult to predict how long the bear market may last. However, analysts believe that early-stage crypto investors could weather the storm and eventually see significant profits in the next bull run. Colleen Sullivan, a co-head of the venture group at Brevan Howard Digital, believes the downturn could last 18-24 months. She said,
“The current crypto downturn could run for another 18 to 24 months. Uncertainty now is higher than during the last crypto crash between 2018 and 2020. What’s different now is the global macro environment. We haven’t invested with rising rates and inflation before. But new investors in early-stage investments should, in theory, be able to ride out the maelstrom and see profits in the end. It’s the absolute perfect time to deploy a new fund,”
Do you think a bear market is the best time to double down on investments in the crypto industry? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
