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Venture capitalists battling the difficulty of proper crypto company due diligence should consider going back to the basics of “trusting the chain,” says a crypto-focused venture fund executive. do.
John Law, head of digital assets at Recharge Capital, a $6 billion fund with a portfolio of cryptocurrencies and decentralized finance (DeFi) projects, told Cointelegraph that FTX is “a It has shaken the trust in
“There will be a lot of soul-searching,” he said. Due diligence has always been an issue in the venture space, even outside of cryptocurrencies, Law said.
He said the action plans taken by crypto venture capitalists in response to the collapse of FTX will be a key determinant for an effective recovery or deepening of the industry’s crisis.
However, Law argues that the crypto industry is providing the world with a step towards a solution and a public immutable ledger, arguing that:
“Crypto VCs especially need to return to crypto principles. Trust the chain. More companies will operate on-chain, and VCs will rely on on-chain data to pay more thorough attention. is needed.”
“There will be better tools to extract and track on-chain data. In fact, entire on-chain businesses may even be sold wrapped in NFTs, optimizing the painstaking M&A process.” There is,” he added.
Last year, the total amount of money raised in cryptocurrency venture capital surpassed 2021, with $30.3 billion secured by cryptocurrency projects, according to Cointelegraph Research’s VC database.
The fourth quarter of 2022 saw the lowest capital inflows to the industry in two years, with 371 deals allocated to It was just $2.8 billion.
Q4 2022 saw the slowest investment in cryptocurrency VC in two years, with just $2.8 billion allocated to 371 deals.
In total, $30.8 billion was invested by VCs in 2022 compared to $33 billion in 2021.
Crypto VC could be muted for several quarters due to rate, macro and crypto price headwinds pic.twitter.com/RaVGNBWzVa
— Alex Thorne (@intangiblecoins) December 31, 2022
While the FTX meltdown has sparked negative sentiment across the industry, Lo said the decline in funding also reflects the macroeconomic scenario.
“The high interest rate environment doesn’t bode well for a risk-on industry. He believed that as 2023 progresses and the macroeconomic outlook stabilizes, so will the industry.
“It’s probably a good thing that bad actors and bad practices are removed early rather than later.”
Lo predicted that as the year progresses, more capital than influx will enter the industry, with more emphasis on on-chain products and services than tokens.
The many challenges that have surfaced during the bull market will also be noted, including user experience, wallets, user onboarding, and compliance.
“Major narratives are forming around blockchain scalability, liquid staking, real-world assets, decentralized exchanges and platforms,” said Lo.
“These optimizations will be key to growth after a period of frenzied experimentation, and as always there are teams working behind the scenes on groundbreaking products that have yet to be seen.” he said, adding:
“Krypto is alive and well.”
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