A stock chart is seen with a representation of bitcoin in this illustration taken March 13, 2020. REUTERS/Dado Ruvic/

July 26 (Reuters) – All is not gloomy.

Even as the crypto sector shivers through the gloomy winter, venture capitalists are pumping money into digital currency and blockchain startups at a pace that is expected to surpass last year’s record high. .

In the first half of the year, VCs bet $17.5 billion on these companies, according to data from PitchBook. This puts investment on track to surpass the record $26.9 billion raised last year, a warmer and happier time for bitcoin and co.

“Current market conditions – I don’t think they’re deterring investors,” said Roderik van der Graf, founder of Hong Kong-based investment firm Lemniscap, which focuses on crypto and blockchain. “The available capital is huge.”

Venture capital funds provide funding to young companies that they believe have strong growth prospects. The data suggests strong faith in the future of crypto and blockchain technology, despite a deadly six months for the industry.

A double whammy of macroeconomic headwinds and blowouts in big projects this year saw bitcoin tumble around 65% from its November all-time high of $69,000, with the overall crypto market value dropping by two-thirds to $1 trillion.

Businesses have shaken as prices fall, with major US exchange Coinbase Global (COIN.O) and NFT platform OpenSea among those laying off hundreds of workers.

Yet some VCs are ignoring the gloom, with many deploying sizeable war chests, as their faith in the underlying cryptocurrency technology remains strong.

While not all investors are so optimistic about the crypto carnage, by no means.

David Siemer, CEO of California-based crypto management firm Wave Financial, said there were signs of a pullback from the sky-high valuations of crypto companies last year.

“It’s going to get worse – we’ve been in this cycle for a few months. In the last cycle, the pain for those seeking funding was around 12 months.”

AMERICAN HOTSPOT

North America, long the hot spot for venture capital deals, was again at the center of activity with around $11.4 billion in the six months to June, down from $15.6 billion dollars for all of last year.

The figures contrast with general venture capital activity in the United States, where deals fell to $144.2 billion in the first half of the year from $158.2 billion in the same period last year. macroeconomic conditions and market turmoil chilling investment. Read more

Rumi Morales, chief investment officer at Digital Currency Group, a prominent US VC, said the data reflected growing faith in the crypto and blockchain industry.

“Before, there was an existential risk in space – that the whole industry was just going to disappear, it was all just a dream. That’s no longer the case.”

Adoption of crypto as an investment tool has proliferated in the past year, with the use of blockchain also gaining traction – even as game-changing changes in technology promised to industries such as finance and materials first ones remain elusive.

Among the US crypto mega deals in 2022: $400 million raised by US arm of crypto exchange FTX in January; a $450 million fundraising round by blockchain developer ConsenSys in March; and $400 million raised by stablecoin issuer Circle a month later.

Activity is also strong in Europe, with $2.2 billion in venture capital investments in the first half.

Lisbon-based Fedi, an app designed to help people receive, hold and spend bitcoin, said this month that it raised $4.2 million in seed funding.

“Within seven days, we had all the investment commitments,” Obi Nwosu, one of its founders, told Reuters. “And in less than a month and a half, we had the original fundraising goal in the bank. Done.”

Reporting by Tom Wilson in London and Medha Singh and Lisa Pauline Mattackal in Bengaluru; Assembly Pravin Char

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