Industry participants may be forgiven for assuming that specific sectors, such as DeFi and Web3, are in jeopardy given the recent wave of events rocking the entire crypto industry.
Deploying capital while uncertainty looms is not without inherent risks due to the weakened confidence among institutional and retail participants sparked by the controversy surrounding crypto lending.
Although regulations aim to tighten controls over how crypto capital is used, interacted with, and deployed, some argue that more needs to be done to protect investors.
A global macroeconomic perspective also reveals less encouraging indications of an early rebound in larger markets, particularly equities, which have frequently been closely associated with cryptocurrency.
Concerns about a global food scarcity brought on by the pandemic, which was exacerbated by Russia’s invasion of Ukraine, as well as rising inflation and the leveraging of interest rates by central banks to combat it, have all but strengthened the case for a “risk-off” climate.
The capital market for cryptocurrencies has indeed experienced a decline in investment. During Q2, investment in new projects declined more than what was experienced in previous quarters.
Stan Miroshnik, a partner at mid-to-late stage digital equity firm 10T Holdings, which specializes in digital assets, believes that there are still many unique opportunities for investors in the field.
In an interview with Blockworks, Miroshnik said, “We’re just now starting to see interesting deals come back into the market at more reasonable valuations.”
Others in the cryptocurrency capital investment space have ramped up their efforts to acquire or support businesses creating Web3 and DeFi infrastructure amid a bear market in the hopes of making more profits later.
Multicoin Capital, a cryptocurrency investment company that has backed numerous Web3 and decentralized finance projects, announced earlier this month that it would invest an additional $430 million in cryptocurrency firms.
In keeping with this trend, the venture capital and incubation arm of Binance closed its $500 million fund in early June, while early-stage investment firm Konvoy Ventures launched a $150 million fund for nascent gaming startups targeting several verticals, including Web3.
Most venture capital firms and funds are betting big on the internet’s evolution into a more democratized and decentralized platform for information sharing and participation, including the tools and infrastructure that decentralized finance offers for that evolution.
Following the contagion upheaval caused by crypto lenders caught up in the implosion of Singapore-based hedge fund Three Arrows Capital, the industry’s primary infrastructure system developers are now discussing building in a less-than-frothy market.
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