- Despite market rebound, crypto VC funding lags, raising concerns.
- Rising interest from VC firms in crypto despite cautious sentiment.
- Regulatory uncertainties, like Ethereum ETF approval, dampen market optimism.
Analysts at JPMorgan have pointed out a concerning trend in the crypto industry, despite its uptick lately. Despite a market resurgence, venture capital funding in the sector has remained lackluster this year. Compared to previous years, this subdued flow of funds is raising red flags about the sustainability of the market’s recovery.
Since this year began, the blockchain market has attracted venture financing of $3.2 billion, notably lower than the $4 billion raised in the same period last year. This discrepancy suggests investors are cautious despite the positive market sentiment.
However, there are signs of increasing interest from venture capital firms in the crypto space. Many firms, however, have managed to either issue new bonds or are in the process of doing it, primarily due to the ongoing market bounce back. For instance, 1kx raised $75 million to support upcoming crypto startups, while Paradigm reportedly seeks to raise between $750 million and $850 million for a new fund.
Moreover, Galaxy Digital, Hack VC, and Hivemind Capital are also reportedly in the process of raising significant amounts for their new funds, indicating a growing appetite for crypto investments among traditional financial players. Additionally, the third fund of the crypto accelerator Alliance received $10 million each from Brevan Howard Digital and Galaxy Digital, with plans to raise an additional $80 million by July.
While venture capital funding is slowly picking up, crypto hedge funds have been more active this year. As estimated by JPMorgan analysts, their assets under management have surged to around $20 billion over the past six months.
However, despite the growing interest in crypto investments, uncertainties persist, particularly regarding the U.S. SEC’s approval of a spot Ethereum ETF. According to JPMorgan analysts, there is a 50% chance the approval will play out by May, as sentiment in the market is growing more skeptical.
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