Digital currencies, public stocks and venture capital backing crypto startups have finally cooled down after massive growth due to the effects of an economic storm, according to Bloomberg.
Bloomberg reported, citing data from the research firm PitchBook, that funding for private crypto firms in the second quarter fell to its lowest level in a year.
Prior to the economic turmoil, cryptos' rising popularity helped set a record of $9.85 billion in venture funds raised in the first quarter. However, according to Bloomberg, that just indicated how long it would take for venture capital deals to finalize.
"Even though the crypto market started slowing down in November, December, those deals were already in discussion, so they closed in the first quarter," said Robert Le, fintech analyst at PitchBook.
The second quarter has provided a clearer picture of the effect of the economic turmoil on crypto companies. According to PitchBook, venture capitalists invested $6.76 billion into crypto companies in the period that ended in June, a 31% decline from the previous quarter.
"The crypto industry now mirrors the sluggish activity among tech and venture capital investors," Bloomberg reported.
"Everyone is really hesitant on closing deals right now," Le said.
The collapse of the TerraUSD stablecoin, critical financial troubles at crypto lenders like Celsius and Babel Finance, and several employee layoffs at Coinbase, Gemini and Crypto.com are all examples of the effects of the market downturn on the crypto industry, which have also contributed to the uncertainty.
While in the crypto startup sector, David Pakman - a managing partner at the crypto VC firm CoinFund - told Bloomberg that deals have fallen apart, and investors have revoked written offers in recent weeks.
Bloomberg added that more layoffs are likely, and valuations will decrease further. It added that the troubled crypto lender BlockFi Inc. was already looking to raise money at a reduced valuation of $1 billion.
"What you're seeing now is seed valuations are down about 20%, Series A valuations are down about 50%, and then Series B and beyond are down about 70%," Pakman said.
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