Can VCs Get Crypto Out Of This Slowdown? – Tech Crunch

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Last week we saw Musk clinging to Doge. This week we’re talking about where all that crypto VC money could go.

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maybe it’s all just a game?

A weekly dispatch from crypto editor TechCrunch’s office Lucas Matney:

The reality is that the dreams of web3 investors and founders are kind of stalling – a crypto decline generally means less hype, less chatting with friends, and generally less organic consumer integration into consumer experiences. This is less than 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 the mainstream cryptocurrency target audience, with recently slammed acolytes 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 downward spiral; many will use the period of diminished attention to pour in infrastructure and “picks and spades” tool sets. Others could become insular and support consumer projects that are even more detached from the larger world of crypto, but expose users to synthetic economies, wallets and digital goods, an arena particularly well served by crypto-soaked games.

Gaming seems to be a big beachhead for crypto consumers and I would expect many of these dedicated crypto funds to pour a significant portion of their money into studios and platforms that pursue this. There are many significant challenges, including overall negative user sentiment and getting buy-in to the platform as NFTs continue to be treated with a high level of hostility from app stores and gaming platforms.

The standalone worlds of game titles with special tokens disconnected from the more self-referential corners of crypto may be the easiest place to find new eyes. And as the cost of acquiring customers rises across the board, VCs may be more willing to subsidize customers directly as part of user acquisition, returning to the days of the gig economy, where VCs bribe new users to to sign up.

It has been a weird bull cycle for crypto gaming. While a lot of money has been put into game-to-win titles and SNES-quality DeFi-infused pixel games, it’s fair to say that nothing has come of it that’s really good. Most games are over-indexed on winnings and obvious ponzinomics pushing growth to its limits without worrying about stability. Making great games takes time, and fun games create a level of user concern that is difficult to optimize when trying to maximize short-term gains on both sides of the trade.

the last module

We thought winter was already here for crypto, but US regulators just made it look a lot colder. First, the US Department of Justice arrested three people, including a former Coinbase employee, for alleged insider trading at the fair. Than the Securities and Exchange Commission accused them of securities fraud, arguing that several of the coins they traded were in fact securities — a designation that comes with a slew of rules that Coinbase and other exchanges haven’t necessarily followed. We’ve shared our unofficial thoughts on how the laws might be interpreted and what it could mean for major crypto exchanges (more on that in my “this week on the web3” section below).

We also talked about the bitcoin situation that could finally be enough to turn Elon Musk stans into skeptics and the much-loved video game. Minecraft cancels NFTsAt least for now. Our guest was David Nage, portfolio manager at digital asset management firm Arca, who helped us understand the ongoing chaos on the markets.

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Follow the money

Where seed money moves in the crypto world:

  1. Decentralized Social Media Platform (DeSo) DSCVRbuilt on Dfinity’s internet computing ecosystem and secured $9 million in seed funding led by Polychain Capital.
  2. Unstoppable domainsa popular blockchain naming system and identity platform provider, raised $65 million in its Series A funding round at a $1 billion valuation led by Pantera Capital.
  3. Aptos Laboratoriesa blockchain project run by former Meta employees, has raised $150 million in a Series A led by FTX.
  4. Blockchain ecosystem High has 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 has raised $5.3 million for its round of funding from investors including Coinbase and Kraken.
  6. Solana based NFT real estate platform cardinal announced its $4.4 million fundraising round led by Protagonist and Solana Ventures.
  7. Web3 game company mighty bear has raised $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 makes community-owned Web3 broadcasts.
  9. cybersecurity blockchain protocol naoris has raised $11.5 million in an equity and token-based funding round from investors including Draper Associates.
  10. South Korean Metaverse Society Anipen has secured an investment of approximately $12 million in the pending Series B funding round from Medici Investment and others.

the week in web3

A weekly look into the thoughts of the web3 journalist 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 in the crypto exchange, they were charged with securities fraud by the SEC. Shortly thereafter, Bloomberg revealed that the SEC had previously investigated Coinbase for potentially allowing securities to trade 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 sign 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 the tokens on their platform before listing them to make sure they are not securities.

If Coinbase is nailed into this suit, it will have ripple effects across the industry. Other major crypto firms are already facing similar allegations, including Binance, Ripple Labs and Yuga Labs, either in the form of disgruntled investors filing lawsuits against them in hopes of getting them into trouble for illegally selling securities, 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 are and how they could change. That’s exactly what I did in my last article with Alex Wilhelm for TechCrunch+, where we delved deep into the four-part “Howey Test” to try to determine whether the SEC or Coinbase has a stronger case.

TC+ analysis

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

Crypto Valuations Could Fall Until September While VCs Play a Waiting Game
“Tons of capital have been raised in the crypto industry in recent months, but there is a noticeable pause in the rollout. This may change in the coming months. As it took longer to close crypto VC deals, valuations fell across the industry, according to David Nageventure capital portfolio manager at Arca.

Investors are targeting DeFi as it remains resilient to crypto market volatility
“While many crypto market subsectors continue to take a heavy toll on recent volatility, some market participants view decentralized finance (DeFi) as resilient and gaining ground despite the negative macro environment. Centralized financial institutions are similar to traditional businesses, with people running their operations and managing their money. DeFi protocols, on the other hand, use technology — not humans — to run services through things like smart contracts.

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