Venture capital (VC) funding for the cryptocurrency sector has dropped by more than two-thirds compared to 2021, a team of J.P. Morgan Chase strategists reportedly said.
This drop in funding to the current pace of about $10 billion a year signals that the sector’s slump may continue, Bloomberg reported
Friday (Nov. 4).
“This is a concerning development as it shows reluctance by VC funds to deploy capital into the digital asset space, increasing the likelihood that the current weakness in crypto markets would be long lasting,” the J.P. Morgan team wrote in a note, according to the report.
As a drop-off in VC funding in the sector that happened in July and August continued into September and October, it became clear that the change was not just seasonal, the team said, per the report.
PYMNTS has reached out to J.P. Morgan for comment.
As PYMNTS reported Oct. 27, the cryptocurrency market capitalization had dropped to $1 trillion at that time from the all-time high of $3 trillion at the market’s peak in November 2021.
For VC firm Andreessen Horowitz, for example, that meant that its flagship Crypto Venture Fund I was down 40% in the first half of the year. One of the firm’s best investments, Coinbase, had lost 80% of its value this year as of that time.
The pullback in VC investment in crypto also comes as there has been a downturn, in general, in investing in tech companies, although crypto investing has seen a sharper drop due to the higher risks.
At the same time, a survey released Oct. 27 by Fidelity Investments found that 58% of institutional investors invested in digital assets in the first half of 2022, and nearly three-quarters of investors said they plan to invest in the future.
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