Morgan Stanley strategists believe the era of easy money is over, and crypto venture capital funding will likely drop by half by the end of 2022.
The crypto industry has seen a wave of venture capital firms investing in various assets and blockchain firms since the start of 2021. However, American multinational investment management and financial services company Morgan Stanley believes the amount of crypto VC funding could slow down significantly by year-end as the period of “easy money is over.
Although crypto VC funding has continued to flow into blockchain companies since the start of 2022 despite the bearish market sentiment, the strategists expect a 50% drop in such investments by the end of this year if the crypto industry matches the trends in other sectors. Morgan Stanley noted that the performance of eight of the “most important VC markets” over the last 12 months has slumped by 50% from ATH. The strategists added that could happen to crypto VC funding if it follows the same trend, considering the current bearish conditions.
“Activity across eight of the most important VC bellwether markets over the past 12 months has reset 50% from peak; worsening performance of some of the largest tech/crypto investors who are prioritizing existing holdings over deploying further dry powder, and the exit of ‘tourist capital’ as both token and equity investments become more challenging during a crypto bear market – a similar pattern seen during 2018/19,” the report said.
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