Andreessen Horowitz is the largest cryptocurrency investor in Silicon Valley. Thus, the venture capital company, nicknamed a16z, is also one of the main victims of the crisis they are going through at the moment. You must now be dealing with investors worried about a possible “crypto winter,” as there might be artificial intelligence or virtual reality.
a16z has invested heavily in coding
It must be said that the company has poured money into many Web3 companies such as Coinbase, OpenSea or Solana. An initiative spearheaded by Chris Dixon, the company’s general partner and key decision maker for crypto investments. His influence in the community is significant, and he has made a significant contribution to the growth of fundraising in NFTs.
It has invested more than $7.6 billion in the sector so far. In 2018, he launched a cryptocurrency fund totaling $350 million (the first of its kind), then a second in 2020 and a third in June 2021, as a result of a rapid fundraising of $2.2 billion. Last May, the company doubled down on announcing the closing of a new $4.5 billion fund dedicated to the sector. But the timing wasn’t right, with the downturn since the tech stock bubble and bitcoin prices ebbing.
Cryptocurrency is in crisis
Inflation and rates imposed by central banks cause parallel currencies to fall. At the time of writing this article, Bitcoin is worth around €20,712, a number far (-70%) from the roughly €69,000 (the benchmark value) offered in November 2021, which says a lot about the market crash. Solana, a cryptocurrency startup that Andreessen Horowitz bought in June 2021, has lost more than 80% of its value since the beginning of the year.
Many a16z-enabled businesses are facing reduced demand. This is particularly the case for Coinbase, whose user count has fallen sharply. In the first six months of the year, Andreessen Horowitz lost $2.9 billion regarding his remaining stake in the company, which also lost 80% of its value. The demand for NFTs, this blockchain application for exchanging digital goods, also seems to have dropped to nothing.
-40% in six months for the main fund A16Z
Wednesday, October 27, 2022 AD Wall Street Journal According to “people familiar with the matter”, Andreessen’s main cryptocurrency fund lost about 40% of its value in the first half of 2022. Overall, the ecosystem has become more complex with tightening regulation in most western countries. Even then, the lack of regulation facilitated the creation of thousands of cryptocurrencies, many of which ended in spectacular failures, moreover often linked to scams.
As a result, the California VC is still slowing down its investments in the cryptocurrency ecosystem, despite the record cash. The company announced nine cryptocurrency startup deals in the third quarter of 2022, down from announcing 26 deals in the fourth quarter of 2021. The company also devalued its second and third crypto funds this year.
In profit in spite of everything
But if the balance sheet of the past few months has been bleak, it shouldn’t take away from the big profits Andreessen has already made thanks to cryptocurrency. The company is behind one of the most profitable bets in venture capital history, returning more than $4 billion in equity to investors in the two months since its Coinbase IPO with a direct listing in April 2021. By the end of 2021, Andreessen Horowitz had doubled his initial investment. by 10.6 times. So even with the current ‘crypto winter’ and 50-60% loss in bitcoin price, a16z is still definitely profitable…
“Long term horizon”
Above all, this does not prevent Chris Nixon from firmly believing in the future of the sector, and from continuing to invest in it. Maintaining his conviction, he told the WSJ that he is considering a “very long-term horizon” for cryptocurrencies, as the industry is “still in the early stages of user acquisition.”
According to him, the market downturn is “an opportunity for the company to continue supporting cryptocurrency entrepreneurs.” He continued, “What I’m looking at isn’t the prices. I’m looking at the activity of entrepreneurs and developers. That’s the bottom line,” and remained “true to the crypto-centric view of the Internet called Web3.”
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