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Venture Capital-Backed Crypto Funding May Slow, Forecasts Morgan Stanley Report

Garrett Meifert

Summary: Crypto-related firms raised a record $30 Billion of venture capital in 2021, with the peak reached in December of that year. This trend has failed to remain through the recent downturn, with funding sliding relative to past metrics. A recent Morgan Stanley article suggests this may worsen over the remaining half of the year. Venture ...

Crypto-related firms raised a record $30 Billion of venture capital in 2021, with the peak reached in December of that year. This trend has failed to remain through the recent downturn, with funding sliding relative to past metrics. A recent Morgan Stanley article suggests this may worsen over the remaining half of the year.

Venture Capital is a form of pre-IPO investing where funding gets granted to startups and small businesses with considerable growth potential. It is often the first vital funding startups receive to allow them to compete with larger companies or grow a new idea.

High U.S. dollar liquidity and soaring cryptocurrency prices in 2021 helped fuel record investment in crypto-related business, with more than 1,800 deals coming to fruition. Investment in 2021 was over a 150% increase over the average of the five years prior, and this represented 7% of all venture capital funding globally. 

This year, total crypto investment product inflows totaled $520 million, which is well short of the $5.9 billion raised last year. Last week alone, inflows totaled $87 million, which shows that investors are trying to capitalize on the recent slide in price. This is just a tiny step in the right direction, as assets under management last week were at their lowest point since July of last year.

According to Morgan Stanley, total venture capital funding has been down in recent months. The article states, “activity across eight of the most important VC bellwether markets over the past 12 months has reset 50% from peak.” Furthermore, they believe the venture capital crypto sector will track this trend, with a 50% slide possible by the end of the year.

The article continued by stating, “Worsening performance of some of the largest tech/crypto investors who are prioritizing existing holdings over deploying further dry powder, and the exit of ‘tourist capital’ as both token and equity investments become more challenging during a crypto bear market - a similar pattern seen during 2018/19.”  

The article highlights current fears in the crypto and crypto funding industries and could represent a potential investment opportunity for someone willing to buck the trend. 


Author: Garrett Meifert

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Link: Venture Capital-Backed Crypto Funding May Slow, Forecasts Morgan Stanley Report   [Copy]
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