The cryptocurrency market has been on free fall for months, erasing billions off the once $2 trillion dollar market. This has seen the market’s frenzy waned as rattled investors sell off their assets in fear of total collapse of the market.

However, amid the market’s turmoil, institutional investment in cryptocurrency is witnessing a surprising uptick that offers hope of a market rebound. Besides countries like the Central African Republic that have adopted bitcoin as a legal tender, states in the US and payment companies are increasingly showing interest in cryptocurrency. Some Silicon Valley big wigs are now betting big on the market’s future.

Andreessen Horowitz has announced plans to throw billions of dollars into crypto start-ups, CNBC has the report.

The Silicon Valley firm announced a new $4.5 billion fund for backing crypto and blockchain companies on Wednesday. It marks Andreessen’s fourth fund for the asset class and brings its total raised for crypto and blockchain investments to $7.6 billion. The firm plans to invest in both the cryptocurrencies behind projects and in company equity.

Andreessen’s first crypto-focused fund was launched four years ago, during a downturn now known as “crypto winter.”

“Bear markets are often when the best opportunities come about, when people are actually able to focus on building technology rather than getting distracted by short-term price activity,” Arianna Simpson, a general partner at Andreessen Horowitz told CNBC in a phone interview.

Cryptocurrencies have slid significantly from their all-time highs, with bitcoin down more than 50% since its November peak, and they remain tightly correlated to higher growth tech stocks, which have undergone a major slide this year. Earlier in May, the crash of stablecoin TerraUSD shook investor sentiment and caught the attention of regulators.

But Simpson said investors should not worry about the firm’s bets.

“The technical diligence and the other kinds of diligence that we do are a key part of of making sure that projects meet our bar,” she said. “While our pace of investment has been high, we continue to invest really in only the top echelon of founders.”

Simpson and partner Chris Dixon liken the long-term opportunity in crypto to the next major computing cycle, after PCs in the 1980s, the internet in the 1990s and mobile computing in the early 2000s.

Andreessen Horowitz is known for early bets on Lyft, Pinterest and Slack, and made its first major crypto investment with Coinbase in 2013. The firm has since backed a variety of start-ups in the crypto and NFT space, including Alchemy, Avalanche, Dapper Labs, OpenSea, Solana and Yuga Labs. Earlier this week it invested in Flowcarbon, a carbon-credit trading platform on the blockchain also backed by controversial WeWork founder Adam Neumann.

While cryptocurrencies may be struggling to regain momentum, money flowing into private companies is at all-time highs. Blockchain start-ups brought in a record $25 billion in venture capital dollars last year, according to recent data from CB Insights. That figure is up eightfold from a year earlier. Yes, besides the consumer use cases of blockchain, the enterprise blockchain use cases are many, and those applications could redesign and transform industries. That is why leading investors are pouring funds into blockchain ventures.

The flood of investment into so-called “Web3” start-ups trying to build businesses on blockchain technology has inspired scorn from some tech luminaries. Two of the world’s best-known tech billionaires, Tesla CEO Elon Musk and Twitter co-founder Jack Dorsey, have been among those questioning “Web3.” Dorsey argues VCs and their limited partners are the ones who will ultimately end up owning Web3 and it “will never escape their incentives,” he tweeted, calling it a “centralized entity with a different label.”

“The people who are skeptical are not where we are, which is again in the fortunate position of being able to talk to these brilliant builders all day,” Simpson said. “The other thing I would add is that many of the skeptics are the titans of Web 2.0 — they have been very much in a position to profit from and benefit from the closed platforms.”

I have been speaking with our startups in Tekedia Capital and the message is clear: cut costs and do everything to successfully go through  a severe dislocation which is brooding in the world. Even at Tekedia Institute, more and more learners are asking for payment plans. Analyzing data I am getting from dozens of companies, my conclusion is that we’re entering a challenging phase in the global economy. 

If you run a business, now is the time to look at your cost elements. If you work as an employee, now is the time to feed the piggybank because many bad things can happen. Africa is going to be the hardest hit (after Ukraine of course) in the Russia-Ukraine war because the world sees the continent as “error” digits now.

The United States major challenge now is China, not even Russia: ‘“China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it,” Secretary of State Antony Blinken said in a speech at George Washington University.’ The fear is clear: if China aligns with Russia, Europe will host two “unfriendly” countries in-house, within Europe. How do you sleep with that?

“We do not support Taiwan independence, and we expect cross-strait differences to be resolved by peaceful means,” he said. “Our policy has not changed. What has changed is Beijing’s growing coercion, like trying to cut off Taiwan’s relations with countries around the world and blocking it from participating in international organizations.”

Blinken acknowledged that the U.S. will have to compete with China on multiple fronts but took steps to avoid ratcheting up tensions between the countries.

• Russia Gas: Russia can withdraw from Ukraine and the next day cut-off gas supplies to the whole of Europe. If that happens, some EU countries will struggle. Countries like Germany and Hungary will be devastated and the implications may result in a global recession.
• US Economy: As the US central bank works to tame inflation, by increasing interest rates, easy money will go. Expect global funds to pause on investments in some emerging economies. As that happens, high interest rates will mean borrowing for nations like Nigeria will be more expensive.
• Political Risk: In all you do, have a model that Nigeria could experience turmoil. We were lucky in 2015 (Jonathan) and 2019 (both candidates are from the North); 2023 looks increasingly volatile.
• Naira Devaluation: I do not expect any official move before the election. But fighting to protect the Naira is largely non-existent. So, the paralysis in the black market will continue. N670/$ by May 2023 is a possibility.
• Global Hunger: from rising supply chain costs (fuel cost, Ukraine war, etc) to inability of farmers to go to farms due to insecurity, food security will become more challenging in Nigeria.

Cutting Cost

When I say ‘cut cost’, it does not mean stopping every investment. Rather, the message is to allocate capital more prudently, conserve cash and find ways to run lean. It also means a call to find a path to profitability even if it means sacrificing short-term growth. Because raising funds in H2 2022 will be tougher, you win by just surviving. 

And for that to happen, you have to cut the party and that means reducing cash for marketing, projects, etc and pushing for a path for the best investors (the customers) to fund. The best investors are customers – and you must get them to believe in you now.

At Tekedia Startup Masterclass and Tekedia Town Hall, we will be focusing on these topics as we work together to navigate the wave.

1. The tech sector has had a tumultuous year: The Nasdaq index is down 26% while Bitcoin has plummeted a whopping 36%. That trouble is now starting to translate into layoffs, with venture capital-backed firms being hit especially hard as investors abandon risky bets and seek immediate returns. So far this week, firms including fintech unicorns Bolt and Klarna and delivery startups Gorillas and Getir have announced workforce cuts. Tech giants such as Netflix and PayPal are also shedding jobs, while Uber, Lyft, Snap and Meta have slowed hiring.
2. Snap’s stock plummeted 43% Tuesday — dropping below its initial public offering price — after the company cut its revenue and profit forecasts for the year. The Snapchat owner said it was struggling with inflation, higher borrowing costs and supply chain shortages, and would now slow hiring and spending. Snap’s troubles led investors to flee other firms that rely on digital ad revenues, which analysts said may have peaked. Meta’s stock fell 7.6%, Alphabet’s 5.1% and Twitter’s 5.2%.’

(LinkedIn News)