The economic environment may seem dire at the moment, but it is unlikely to affect blockchain development, according to to Pantera Capital CEO Dan Morehead. In an interview with Real Vision on Thursday, the venture capitalist said he believes blockchain technology will work on its own fundamentals, regardless of the conditions indicated by traditional risk metrics:
“Like any disruptive thing like Apple or Amazon stock, there are short periods of time where it correlates with the S&P 500 or whatever risk metric you want to use. But over the last 20 years, it’s done its own thing. And that’s what I think is going to happen with blockchain over the next ten years or whatever, it’s going to do its own thing based on its own foundations.”
During the first half of this year Pantera Capital raised $1.3 billion in capital for its blockchain fund with a special focus on scalability, DeFi and gaming projects. “The last few years we’ve been very focused on DeFi, it’s building a parallel financial system. Gaming is now coming online and we have several hundred million people using blockchain. There are a lot of really great gaming projects and there’s still a lot of opportunity in the scalability sector,” he added.
However, the long-term optimism contrasts with the actual decline in venture capital in the industry. August was the fourth in a row month-on-month decrease in capital to $1.36 billion, according to Cointelegraph Research. Inflows represent a 31.3% drop from July’s $1.98 billion, with 101 deals closed in August, for an average capital investment of $14.3 million – a 10.1% drop from July.
The crypto winter was expected to spur consolidation in the sector, but recent figures from Crunchbase exposed that only four deals with VC-backed crypto companies closed in the United States this quarter — down from 16 deals in the first quarter of the year.
Sandeep Nailwal, managing partner at Symbolic Capital, explained that the bear market has pushed back even the big players in the industry:
“Everyone expected mergers and acquisitions to take off in crypto when we headed into this bear market, but we haven’t seen that yet. I think the main reason is that the downturn hit the industry so fast and so hard that even the big companies , which positioned themselves as aggressive acquirers, were so shaken by the crash that they had to make sure their own balance sheets were in order before looking elsewhere for growth.”
The FTX crypto exchange does not seem to be affected by this issue. The company reportedly engaged in talks with investors to raise $1 billion in new funding to fund more acquisitions during the bear market. “We’ve seen valuations come down significantly from pre-summer highs and you have to think that there are a lot of acquirers, especially in the CeFi space, who are looking at these low valuations and thinking that everything is for sale right now. FTX certainly felt this and was extremely cautious in how it used these market conditions to fuel its growth,” Nailwal said.
The investment arm of FTX announced earlier this month that it did acquired a 30% share in asset management company SkyBridge Capital for an undisclosed amount and Canadian crypto platform Bitvo was bought by FTX in June.
Conversely, e-commerce company Bolt halted plans to acquire Wyre, a crypto and payments infrastructure company, after announced a $1.5 billion deal in April. Weeks earlier, cryptocurrency investment firm Galaxy Digital decided to abandon its acquisition of digital asset manager BitGo, citing breach of contract.
BitGo filed a lawsuit against a crypto investment company for terminating the acquisition, for more than $100 million in damages, and for accusing Galaxy of “improper rejection” and “willful breach” of its acquisition agreement.