Next Steps for Crypto VC

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It wasn’t long ago that venture capital firms started making money like thieves by backing new cryptocurrency projects. Instead of waiting seven years or more for payments, as is often the case with traditional VC investments, he can devour easy returns when those projects issue tokens after a short period of time.The gig was so lucrative that former Twitter CEO Jack Dorsey and others shared meme In late 2021, private investors begged for a drop as VC fat cats gulped rivers of wealth from blockchain products.

Change of times. Many of the venture capitalists who jumped into cryptocurrency today are reeling from the complete depletion of token offerings following the collapse of FTX. According to Brock, their portfolio companies are now holding off on launches of any kind due to concerns over “price, currency exchange fees and increasingly stringent regulations.”

All of this has pushed VC funding into cryptocurrency projects in the fourth quarter to its lowest level in two years, according to new data from PitchBook, with analysts predicting that many venture capital firms will be blown outright. I predict. Meanwhile, other companies that recently dabbled in cryptocurrencies are expected to quit after being set on fire by FTX and bankrupt hedge fund Three Arrow Capitals.

The plight of busted venture capitalists in cryptocurrencies is unlikely to arouse much sympathy from the general public or even industry, which many blockchain builders see as greedy and centralized intruders. Exiting the venture capital industry isn’t always a good thing, as VCs can provide mentorship and connections to the traditional business world that many founders typically lack.

Meanwhile, venture capitalists are unlikely to disappear entirely. Especially since many of them still have a lot of what the VC crowd calls “dry powder” to invest in the crypto sector. It is possible to imagine a future in which insiders, including VCs, are still part of the It’s a welcome change from the recent era of rushing to issue tokens that are of little use other than to help you dump your bag.

Also, some parts of the cryptocurrency sector would like to see VC disappear entirely, but that is not happening. As PitchBook analysts explained, investment is likely to start pouring in again by the summer, as “cryptocurrency funds are obliged to deploy the massive amounts of capital raised during the digital asset boom.”

Jeff John Roberts
jeff.roberts@fortune.com
@Jeff John Roberts

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