Our experts tell us what you need to know about the cryptocurrency division of venture capital firm Andreessen Horowitz. And what startups and technologies the company is allocating more than $7 billion to

The a16z crypto portfolio has dozens of crypto projects. And among them are both established players and startups that are still building infrastructure. The company’s early bet on Coinbase, the second largest crypto exchange, turned out to be one of the best in the history of venture capital funds. Though it came with very specific allegations of insider trading. The fund invested in leading decentralized exchange Uniswap, NFT marketplace OpenSea and large infrastructure blockchain project Alchemy.

This year, the company has led several multimillion-dollar investment rounds for various crypto projects. Among them, for example, is a $25 million round by Here Not There Labs. Which is developing the Towns protocol for group chat rooms. And which are blockchain-based and use end-to-end message encryption.

A recent nearly $30 million investment round closed the Story Protocol project from the developers of the Radish Fiction app, which was bought out by Korea’s Kakao. Andreessen Horowitz’s cryptocurrency division also led the round. Although it had previously invested $10 million in the project. A $40 million round led by the fund was also completed by blockchain game developer CCP Games.

Probably the main crypto-investment of the company this year was the project LayerZero.

Its developers, led by a16z, closed a $120 million round, after which the valuation of the company behind it, LayerZero Labs, jumped to $3 billion. The total amount of venture capital investment in the project. Which creates an infrastructure for exchanging data between ecosystems that are isolated from each other. And built on different blockchains, exceeds $250 million.

Other projects in the fund’s portfolio with more than $100 million in investments include Optimism, Aleo, Matter Labs (developer of the zkSync solution) and several others. From the last two, as well as from LayerZero, the cryptocurrency community expects to launch tokens. And to conduct airdrops following the example of Arbitrum. Or the same Optimism, but none of the companies have yet announced plans to issue their own assets.

Problems and failures

Despite its scale and strong market position, a16z faced problems in 2022, as did the entire cryptosphere. In October, The Wall Street Journal sources reported that the value of the company’s cryptocurrency fund fell 40%. And that’s noticeably more than other avenues. This was recorded even before the general collapse of the crypto market. Which was triggered by the bankruptcy of the FTX exchange.

Some of the fund’s biggest investments probably didn’t justify themselves. Among them is Helium, a mobile WiFi hotspot startup. In April, the company announced it was moving its infrastructure from its own blockchain to the Solana network. And the HT token trades only on second-tier crypto exchanges. And judging by the price movement, it’s not much in demand.

Another example from our experts is Dfinity. It’s a project that was rebranded as Internet Computer. Which raised $100 million from a16z in 2017. But it did not actually produce any product. And investor funds were invested mainly in a marketing campaign. However, given the success of other projects in the fund’s portfolio. And the financial return from investing in them will surely be able to outweigh the losses from unsuccessful investments.

CPIC and investment firm Waterdrip have launched new crypto venture capital funds. Which targets institutional and high net worth private investors from Hong Kong

Hong Kong-based China Pacific Insurance Company (CPIC) has partnered with investment fund Waterdrip Capital to launch two investment funds in Hong Kong. Which are focused on the blockchain and digital assets industry, reports the Chinese publication 36kr.com.

Hong Kong-based Chin Pacific Insurance Investment Management is part of the CPIC group. According to Forbes, the group’s income for the year 2022 exceeded $68 billion. CPIC is the fourth-largest insurance company in China and more than 60% of its shares are owned by government.

Waterdrip Capital is an investment fund specializing in blockchain projects and has already supported more than 45 crypto startups. This includes the blockchain Polkadot and the Web3 infrastructure project MetisDAO.

The companies launched two digital asset funds, Pacific Waterdrip Digital Asset Fund I and Pacific Waterdrip Digital Asset Fund II. The funds will target institutional investors as well as high net worth private investors.

Pacific Waterdrip Digital Asset Fund I will invest in early stage blockchain projects. Pacific Waterdrip Digital Asset Fund II will manage digital assets that can be channeled into staking (cryptocurrencies on the Proof-of-Stake algorithm).

Our experts note that more and more companies are thinking of opening cryptocurrency-related businesses in Hong Kong. According to The Wall Street Journal, more than 20 industrial companies have informed the government of their plans to open branches there. As well as another 80 have expressed interest in doing so.

The collapse of FTX put the brakes on venture-backed activity, but analysts expect funding for blockchain startups to grow this summer. Crypto-Upvotes expert review

Venture capital investment in the cryptocurrency industry fell to its lowest level in nearly two years in the fourth quarter of 2022. According to PitchBook analysts, $2.3 billion was invested in crypto startups in the last three months of last year. And that’s 75% less than the same period last year.

The last time less money was invested in the crypto industry was in Q4 2020. At that time, it was $1.4 billion. Since then, investments in the crypto industry have been growing, from Q1 2021 ($3.5 billion) to Q1 2022 ($12.1 billion). Between April and June of last year, $7.4 billion was invested in the industry. Аnd between July and September, $4.9 billion.

In all, a record $26.7 billion was invested in blockchain startups last year. Аnd most of that came in the first half of the year. Ventures then began to slow their investment activity. But the collapse of FTX in November prompted them to slow down even more, according to PitchBook crypto analyst Robert Le. According to him, investors are trying to figure out what will happen next and are in no hurry to place capital.

FTX Group’s departure from market, which lacked strict controls and due diligence when investing, also changed the situation for investing in the crypto business. According to Le, FTX had a reputation for making deals and writing big checks. While asking founders only a few questions during the quick approval process. And it often crowded out other venture capitalists.

Immediate prospects

Not having FTX will make for a better market for other crypto investors. Because now they can get back to properly evaluating projects and the necessary prudence. The analyst still expects venture capital investment in the crypto sector to grow in the summer of 2023. That’s partly because many crypto funds are required to use the capital they raised during the digital asset boom.