Last year, a record $30 billion of venture capital in cryptocurrencies was raised by companies. Despite the recent decline in their value, the prices of the VC deals have been confirmed to be keeping their head above the water.
However, experts at Morgan Stanley believe that this activity is highly likely to drop by the end of the year, if the crypto sector follows the trajectory of other venture capital deals that have been on a decline since December. In fact, digital assets experienced their last peak in December as well. The official bank report states:
“Activity across eight of the most important VC bellwether markets over the past 12 months has reset 50% from peak; worsening performance of some of the largest tech/crypto investors who are prioritizing existing holdings over deploying further dry powder, and the exit of ‘tourist capital’ as both token and equity investments become more challenging during a crypto bear market - a similar pattern seen during 2018/19.”
Venture capital investments represent a kind of private equities, financing startups that show signs of potential. Last year, this sector was being sustained by the US dollar liquidity and crypto rising in value. More than 1,800 crypto CV deals were made, which represented roughly 7% of the whole sector.
Morgan Stanley also notes that in recent years, the crypto sector became more diversified. While cryptocurrencies and financial companies ruled 2019, in 2020 DeFi was all the craze, and that was replaced by NFTs in 2021.
However, despite all the unfavorable predictions, the VC crypto sector is still kicking and keeping its value. Only time will tell, if this trend is to continue, or if the venture capital investments in digital assets will follow the pattern of its cousins.