The economic scenario may seem grim at the moment, but is unlikely to affect blockchain development, according Dan Morehead, CEO of Pantera Capital. In an interview with Real Vision on Thursday, the venture capitalist said he believes blockchain technology will perform based on its own fundamentals, regardless of the conditions indicated by traditional risk metrics:
“Like any disruptive thing, such as an Apple or Amazon stock, there are short periods of time where it correlates with the S&P 500 or whatever risk metric you want to use. But over the past 20 years, It’s done its job. And that’s what I think will happen with blockchain over the next ten years or so, it’s going to do its job based on its own fundamentals.”
During the first half of this year, Pantera Capital raised approximately $1.3 billion in capital for its blockchain fund, with a special emphasis on scalability, DeFi and gaming projects. “We have been very focused on DeFi over the years, it is building a parallel financial system. Gaming is now coming online and we have a few hundred million people using blockchain. Very cool indeed Gaming projects are, and still are, a lot of opportunities in the scalability area”, he said.
However, the long-term optimism is in stark contrast to the actual decline in venture capital in the industry. According to data from Cointelegraph Research, August saw a fourth consecutive month-on-month capital decline of $1.36 billion. Inflows represent a 31.3% decline from July’s $1.98 billion, with 101 deals closed in August, with average capital investments at $14.3 million — a 10.1% decline from July.
Crypto winter was expected to promote consolidation in the region, but recent data from Crunchbase revealed Only four deals were concluded with VC-backed crypto companies in the United States this quarter – a setback from 16 transactions from the first quarter of the year.
Sandeep Nelwal, Managing Partner, Symbolic Capital, pointed out that the bear market has eluded even the big players in the industry:
“Everyone was expecting that M&A would land in crypto when we entered this bear market, but we haven’t seen that happen yet. I think the main reason for this is that the recession has driven the industry so fast. and affected so intensely that even large companies posed as aggressive acquirers were so stunned by the crash that they had to make sure they looked elsewhere for growth before that their own balance sheet is in order.”
Crypto exchange FTX does not seem to be affected by this problem. The company is reportedly in talks with investors to raise $1 billion in fresh funding to finance additional acquisitions during the bear market. “We are seeing valuations coming down from their pre-summer highs and you have to think that there is a lot of familiarity out there, especially in the CEFI space, looking at these low valuations and thinking to ourselves that everything is going to be there right now. FTX certainly realized that and were extremely prudent in how they took advantage of these market conditions to fuel their growth”, Nailwal said.
The investment arm of FTX announced earlier this month that it had acquired a 30% stake in asset management firm Skybridge Capital for an undisclosed amount, and Canadian crypto platform Bitvo was bought by FTX in June.
In the opposite direction, plans to acquire Wire, a crypto and payments infrastructure company, shelved after e-commerce company Bolt announced a $1.5 billion deal in April. Weeks ago, cryptocurrency investment firm Galaxy Digital decided to drop its acquisition of digital asset custodian BitGo, citing breach of contract.
BitGo has filed a lawsuit against the cryptocurrency investment firm to terminate the acquisition, seeking damages of more than $100 million, and accusing Galaxy of “unreasonable disapproval” and “intentional breach” of its acquisition agreement.