Crypto's Decline Drags Down Venture Capital Funding

New data has shown that funding for private crypto companies is down, with startups feeling the effect of the economic factors souring digital currencies, public stocks and venture capital.

A report from Bloomberg on Tuesday (July 12) said that the hype around the sector had made it seem as if economic troubles couldn’t touch it. Crypto-related startups had around $9.85 billion in venture funds from the first quarter, but that was largely because of how long it takes to finalize venture capital deals.

Robert Le, PitchBook FinTech analyst, said the deals had been in process in November and December, though the market had begun slowing down by then.

However, Bloomberg reported that the second quarter better reflects the current situation. There was $6.76 billion poured into crypto companies by venture capitalists for the three months ending in June, the lowest level in a year. This was a 31% drop from the prior quarter. Le attributed this to a hesitation to close deals.

David Pakman, a managing partner with crypto VC firm CoinFund, expect more layoffs and lower valuations.

“What you’re seeing now is seed valuations are down about 20%, Series A valuations are down about 50%, and then Series B and beyond are down about 70%,” Pakman said.

He said the companies he backs should start holding enough cash to withstand as much as two years’ worth of hardship, saying it would be a “long-term down market” that wouldn’t come back soon.

See also: Voyager Bankruptcy Cracks Crypto Diehards

PYMNTS wrote recently that crypto investor confidence is down, with reports of customers of bankrupt Voyager likely not to get all of their money back. That has created fear among those who haven’t been intimidated by other crypto declines in recent months.

The report noted that veteran crypto traders have ignored steep losses in the past, saying they’re looking for more long-term gains. But the Voyager bankruptcy may be a turning point for them.

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