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 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,
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