Current issues in the digital asset industry

Here is one of the expert’s quotes on the current situation, published by The Block.

I would say that the market still has a certain hangover to go through. This applies to the entire venture capital industry – and not just cryptocurrencies. A lot of money has been poured into the venture asset class in 2021 and 2022, and a lot of people are not yet willing to accept reality as it really is.

The amount of venture capital investment in the cryptocurrency industry

According to a report by platform Galaxy Digital, investors poured $33 billion into crypto startups in 2021, accounting for 5 per cent of venture capital funding across all sectors globally.

At the height of the pandemic, only a handful of cryptocurrency companies along the lines of NFT platform OpenSea and bankrupt lending platform BlockFi have reached unicorn status. And as Jain suggests, many of those paper valuations were likely inflated.

As a reminder, unicorn status in venture capital investing is awarded to a startup whose valuation exceeds $1 billion. The term was introduced by venture capitalist Eileen Lee in 2013, with the term itself symbolising the rarity and uniqueness of such companies in the business world. Unicorns are often technology or innovation startups that grow rapidly and attract significant amounts of investment. This often happens without going public, experts say.

Venture capital investment by stage

The apparent “hangover” is not just about venture capital. Jain noted that many of the promises of cryptocurrency project teams remain unfulfilled. He continues.

There is so much hype, so much excitement. At the same time, we’re seeing real price stagnation, because the big token launches have fallen in value for many of them over the last year. And as I said, there is uncertainty around what the political situation looks like right now.


Note that sometimes certain world events lead to the collapse of financial markets and cryptocurrencies in particular. For example, the reason for the current drawdown of the coin industry was yesterday's large-scale Iranian missile attack on Israel. In such cases, investors fear the deterioration of the situation - in this situation before the start of a new war in the world - and prefer to close trading positions, which quite obviously affects the market.


Venture capital investments by category

Nevertheless, the expert has not lost faith in the cryptocurrency sphere itself and its ideals.

I still believe in the basic principles behind the industry, and we’ve been through these cycles before. It’s probably the most cyclical industry in the history of capitalism, and often people’s emotions follow the price.

In 2022, Multicoin raised $430 million in its Venture Fund III. According to Jain, it is still in the active formation stage. The expert said the company is not looking to raise additional funds and has likely made some bad investments.

There is some good news: more than 80 per cent of startups that raised funds back in 2022 are still active today. All of this is despite a number of crises the industry has experienced in recent years. That’s according to an October 1 report from venture capital firm Lattice Fund, which Cointelegraph cites as its content.

Lattice Fund analysts reported that of the more than 1,200 crypto startups that raised a total of $5 billion in 2022, 76 per cent managed to launch a product on the mainnet, i.e. the main network of a particular blockchain. Only 18.5 percent are no longer active or have closed down altogether.

The most successful among such products was Eigenlayer, a protocol for Efirium restacking. However, its success in implementing its own go-to-market strategy is quite a rare phenomenon for crypto.

Distribution by stages of startup development

Only 1.5 percent of startup teams managed to find what Lattice called “Product Market Fit” (PMF) or “product-market fit.” Meanwhile, only 12 per cent of projects were able to raise additional rounds of funding.

Infrastructure and centralised platforms (CeFi) proved to be the most successful sectors for investment. According to analysts, 80 per cent of projects from the centralised finance sector and 78 per cent of infrastructure projects launched in mynet.

At the same time, games and meta-universes did not bring the expected results even amid the big hype. The data shows that Efirium remains the preferred tier one ecosystem for new projects, while Bitcoin-based projects have shown the highest resistance to collapse.

New projects in various blockchain ecosystems

About $1.4 billion was invested in 314 Efirium-based projects, and 18 per cent of them eventually collapsed. At the same time, of the 18 Bitcoin-based startups that raised funds, all are still going strong today. However, it is important to realise here that the huge difference in the number of projects still plays a role.

In the case of the Solana project, things are a bit different. Although $350 million was invested in 87 Solana-based startups, due to a number of external factors like the collapse of the centralised cryptocurrency exchange FTX and the corresponding large collapse of the SOL price at the end of 2022, 26 percent of the projects did not survive until 2024.

Solana Labs co-founder Anatoly Yakovenko

Notably, teams working on Solana and Efirium were equally likely to receive additional funding. In contrast, no project based on Near, StarkNet or Flow was able to organise subsequent rounds of fundraising.


The analysts' position is that the current situation with major funding of various blockchain projects has become much worse. However, the development of the industry still continues. Still, in 2024, spot ETFs for Bitcoin and Efirium were launched on US exchanges, which are also attracting large capital.