Can VCs pull crypto out of this downturn? – Tech Crunch

Welcome back to Chain reaction.

Last week we saw Musk cling to Doge. This week, we’re talking about where all that crypto-VC money might go.

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maybe it’s all just a game?

A weekly dispatch from the office of crypto editor TechCrunch Lucas Matney:

The reality is that the dreams of web3 investors and founders are a bit stuck – a crypto downturn generally means less hype, less chatting with friends, and generally less organic consumer integration into consumer experiences. It’s far from ideal for VCs who have seen a web-based consumer dream within reach, but thankfully they have deep pockets thanks to recently raised mega funds with crypto betting as their sole focus.

Still, these are tough times for mainstream crypto’s target audience, with acolytes recently minted and many discouraged from spending more time, money, or effort on new Web3 projects. The question is how do you put that venture capital money to work in a down cycle; many will take the period of reduced attention to pour into infrastructure and “pickaxes and shovels” tool sets. Others could become insular, supporting consumer projects that are even more disconnected from the larger world of crypto, but expose users to synthetic economies, wallets and digital goods, an arena particularly well served by infused games. of crypto.

Gaming seems like a big beachhead for crypto consumers and I would expect a lot of these dedicated crypto funds to pour a significant amount of their funds into studios and platforms pursuing this. There are many significant challenges, including generally negative user sentiment and gaining buy-in for the platform, given that NFTs are still treated with a high degree of hostility by app stores and gaming platforms.

The self-contained worlds of game titles with dedicated tokens disconnected from the more self-referential corners of crypto may be the easiest place to find new eyeballs. And as customer acquisition costs rise across the board, VCs may be more willing to directly subsidize customers as part of user acquisition, returning to the days of the gig economy. where VCs bribe new users to sign up.

It’s been a weird bull cycle for crypto gaming. While a lot of money has been poured into game-to-win titles and SNES-grade DeFi-infused pixel games, it’s fair to say that there’s nothing that’s emerged that’s truly good. Most games are over-indexed on profit and clear ponzinomics that push growth to the most extreme extremes without worrying about stability. Creating great games takes time, and fun games create a level of user concern that is difficult to optimize when trying to maximize short-term profits on both sides of the transaction.


the last module

We thought winter was already here for crypto, but US regulators just made it look much colder. First, the US Department of Justice arrested three people, including a former Coinbase employee, for alleged insider trading on the exchange. Then the Securities and Exchange Commission accused them of securities fraud, arguing that several of the coins they had traded were, in fact, securities – a designation that comes with a whole host of rules that Coinbase and other exchanges did not necessarily follow. We’ve shared our unofficial thoughts on how the laws might be interpreted and what it might mean for major crypto exchanges (more on that in my “this week on the web3” section below as well).

We also talked about the bitcoin situation that might finally be enough to turn Elon Musk stans into skeptics and the beloved video game. Minecraft cancels NFTs, At least for the moment. Our guest was David Nage, portfolio manager at digital asset management firm Arca, who helped us make sense of the ongoing chaos in the markets.

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follow the money

Where startup money is moving in the crypto world:

  1. Decentralized Social Media Platform (DeSo) DSCVRbuilt on Dfinity’s internet computing ecosystem, secured $9 million in seed funding led by Polychain Capital.
  2. Unstoppable Domainsa popular blockchain naming system provider and identity platform, raised $65 million in its Series A funding round at a $1 billion valuation led by Pantera Capital.
  3. Aptos Laboratoriesa blockchain project by former Meta employees, raised $150 million in a Series A led by FTX.
  4. Blockchain ecosystem High raised $15 million in a Series A funding round led by Mercury, Republic Asia and Cryptology Asset Group to help companies track and monetize social impact initiatives.
  5. Crypto lender CLST raised $5.3 million for its funding round from investors including Coinbase and Kraken.
  6. Solana-based NFT property platform Cardinal announced its $4.4 million fundraising round led by Protagonist and Solana Ventures.
  7. Web3 game company mighty bear secured $10 million in a funding round led by Framework Ventures for its Mighty Action Heroes game.
  8. FTX CEO Sam Bankman-Fried led a seed round to Media without trusta startup that creates community-owned Web3 broadcasts.
  9. cybersecurity blockchain protocol Naoris raised $11.5 million in an equity and token-based funding round from investors including Draper Associates.
  10. South Korean Metaverse Society Anipene secured an investment of approximately $12 million in its ongoing Series B funding round from Medici Investment and others.

the week in web3

A weekly window into the web3 journalist’s thoughts Anita Ramaswamy:

After a former Coinbase employee and his two associates were arrested this week at the request of the US Department of Justice for allegedly playing a leading role on the crypto exchange, they were charged with securities fraud securities by the SEC. Shortly after, Bloomberg revealed that the SEC had already investigated Coinbase for potentially allowing securities to be traded on its platform without adequate filings and disclosures.

Interestingly, the SEC charges, at least in the securities fraud case, rested on several pretty niche coins. The token they chose to pursue says as much, in some ways, as the ones they didn’t choose. Anyway, Coinbase is quite upset and says they have checked all tokens on their platform before listing them to make sure they are not securities.

If Coinbase is nailed in this suit, it will have ripple effects across the industry. Already, other major crypto companies are facing similar accusations, including Binance, Ripple Labs and Yuga Labs, either in the form of disgruntled investors filing lawsuits against them in hopes of getting them in trouble for selling securities illegally, or in the form of an investigation by US regulators. , as is the case with Coinbase.

Until we know more about how regulators and legal experts are likely to treat each individual token, it’s worth considering what the current securities laws even are and how they might change. apply to Coinbase. That’s exactly what I did in my last article with Alex Wilhelm for TechCrunch+, in which we dove deep into the four-part “Howey Test” to try to determine whether the SEC or Coinbase has a stronger case. here.


TC+ analysis

Here are some of the crypto scans from this week available on our Senior Journalist’s TC+ subscription service Jacquelyn Melinek:

Crypto Valuations Could Tumble Through September As VCs Play A Waiting Game
“Tons of capital has been raised in the crypto industry in recent months, but there has been a noticeable pause in the rollout. This could change in the coming months. As it took longer to close crypto-VC deals, valuations across the sector fell, according to David Nageventure capital portfolio manager at Arca.”

Investors Focus on DeFi as It Remains Resilient to Crypto Market Volatility
“While many sub-sectors of the crypto market continue to take a heavy toll from recent volatility, some market participants view decentralized finance (DeFi) as resilient and gaining traction despite the negative macro environment. Centralized financial institutions are similar to traditional businesses, with people directing their operations and managing their funds.In contrast, DeFi protocols use technology – not people – to run services through things like smart contracts.


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