Despite the generally negative price action across the crypto industry, continued venture capital investments in the space indicate that the industry is healthy and continues to evolve. Cointelegraph Research’s new venture capital database tracks the activity of VC firms and gives users access to the most important bellwether of innovation and early-stage activity.
Macroeconomic factors have been strangling the crypto economy over the past few weeks and are stoking fears of a prolonged downturn. After the United States Federal Reserve announced it would hike interest rates by 50 basis points, crypto prices went into freefall. Then on May 9, a black swan event affected the Terra ecosystem and wider space when the algorithmic stablecoin TerraUSD (UST) lost its one-to-one peg to the U.S. dollar.
Nonetheless, VC investment in the industry appears to continue undisturbed. So far, Q2 2022 has seen $6.8 billion in venture capital investment. This number may remain on track to match the uptick seen in the previous quarter.
Yet, this should not be taken as an indicator of imminent recovery across the crypto market. VC investments and returns have historically shown extraordinarily weak correlations with both crypto and traditional assets. Depending on the funding stage, it can take years for companies receiving investments to break even, despite the outsized annualized returns that blockchain venture capitalists have achieved recently.
VC investors are in it for the long term when funding a project, and private equity investment does not strongly affect the price movements of publicly traded assets. Instead, activity by VC actors should be taken as a long-term indicator of the level of innovation in the space. Continued investment in startups working on Web3, decentralized finance (DeFi), infrastructure and nonfungible tokens (NFTs) proves that the blockchain industry is still a young, dynamic space — one that is rapidly evolving to adapt to technical challenges.
Cointelegraph Research has put together an industry-leading database that documents this development. It keeps track of all publicly announced VC funding rounds and contains over 5,000 records of venture capital deals in blockchain made over the past 10 years.
Not only does this data provide valuable insight into the level of innovation and future potential of the space, but it also gives early cues regarding potential projects to invest in. VC investors have a nose for promising technologies and are known for spotting auspicious projects long before their coin pumps and hits the mainstream news.
Occasional triple-digit annualized returns are solid evidence of this. To start exploring the darlings of private equity and take advantage of our extensive database of deals, visit the Cointelegraph Research Terminal. The VC database is available for preview and purchase alongside cutting-edge industry reports on DeFi, NFTs, GameFi, mining and more.
Some of the notable VC deals that have already taken place this quarter include Indian crypto trading platform CoinDCX raising $135 million in a Series D funding round, with significant contributions from Pantera Capital and Steadview.
Stablecoin issuer Circle, which backs USD Coin (USDC), closed a round for $400 million after partnering with big names from traditional finance. In late April, Near Protocol — an up-and-coming carbon-neutral smart contract blockchain that integrates with Ethereum, Polkadot and Cosmos — raised $350 million for its ecosystem. There are no strong signs that VC activity is slowing, which indicates that despite the current price uncertainty, the crypto space may not face an innovation winter.
This article is for information purposes only and represents neither investment advice nor an investment analysis or an invitation to buy or sell financial instruments. Specifically, the document does not serve as a substitute for individual investment or other advice.