vc

Dragonfly Capital invests $10M in Bitget amid industry recovery

The exchange currently facilitates cryptocurrency derivatives trading with an open interest of $2.4 billion and has plans to expand its spot trading, launchpad and Bitget Earn products.

Dragonfly Capital has invested $10 million in cryptocurrency derivatives exchange Bitget, the San Francisco-based venture capital firm announced on April 4. The funds will be used to support Bitget’s ongoing global market and service expansion and upcoming corporate social responsibility initiatives directed at crypto education and adoption.

Bitget disclosed that since its inception in 2018, the exchange has grown to comprise over 80,000 traders and 380,000 copy traders, or individuals that sync their trading positions with that of traders using automation. For its 2023 roadmap, Bitget plans to expand its spot trading, launchpad and Bitget Earn products. 

Dragonfly has invested in prominent blockchain firms such as Matter Labs, 1inch and Polygon. The firm had a reported $3 billion in assets under management in 2022. Cryptocurrency derivatives exchanges were negatively impacted by the collapse of FTX in November. At that time, the exchange facilitated $6.6 billion in contracts per day in trading volume and had an open interest of $5.1 billion.

Related: Crypto-focused venture firm Dragonfly acquires hedge fund: Bloomberg

Since FTX’s downfall, central exchanges’ open interest has recovered to approximately $68.5 billion at the time of publication, compared to an estimated $60.1 billion at its nadir in December 2022, according to data from Coinmarketcap and CoinGecko.

 While markets have stabilized from the worst of the FTX collapse, the crypto industry still faces issues, such as the recent Commodity Futures Trading Commission lawsuit against Binance. The CFTC alleges that Binance onboarded an estimated 2.8 million U.S. customers without registering with the regulator. Interestingly, since it is the onus of the seller to perform due diligence checks before onboarding potential customers in the U.S., it is unlikely that alleged users themselves could face the consequences of finding their way onto the exchange.

Reddit co-founder bought 50,000 Ether during presale for $15K

Alexis Ohanian is extremely bullish on cryptocurrency, using the proceeds from his early Ether investment to start a crypto-focused venture capitalist firm.

The co-founder of the social media website Reddit, Alexis Ohanian, reportedly bought 50,000 Ether (ETH) for just $15,000 during the cryptocurrency’s presale in 2014, costing just 30 cents per coin.

Ohanian, who left the social media giant in 2020, told Forbes on Feb. 21 that he found the idea of a decentralized store of value very attractive, partly due to his Armenian heritage, prompting him to take an early gamble on Ethereum.

“Any group of people who have in their consciousness, or in their collective history, some idea of persecution, especially by a state, makes the idea of a store of value that is not controlled by any single state very attractive. And so, in some ways it was hardwired in me then, and made me in a way receptive to the idea of a decentralized currency.”

At current prices, this investment is worth a whopping $82.5 million, according to CoinMarketCap, representing an increase of 549,589%.

He continued to explain how Turkish soldiers seized his family’s inheritance of heirloom rugs during the Armenian genocide in World War I, which led to his interest in “unseizable property.”

Due to his aversion to seizable property, Ohanian is a big proponent of self-custody. He manages the private keys to some of his most valuable crypto-related investments, keeping them off exchanges that are more vulnerable to the prying arms of governments.

When he heard about Ethereum in a meeting with cryptocurrency exchange Coinbase, Ohanian claimed he saw the potential for developers to build a wide range of potentially unseizable assets on top of it, such as nonfungible tokens (NFTs).

As a result, he made his initial investment in Ether but noted in the interview that “in hindsight, I didn’t invest nearly as much as I should have.”

Related: Ethereum derivatives data suggests $1,700 might not remain a resistance level for long

Ohanian founded venture capitalist firm 776 in 2020 using the proceeds from his early investments in Ether and Coinbase. The firm has invested in 29 crypto-related startups and raised $500 million in February 2022 to finance similar investments.

In line with Ohanian’s views that bear markets allow investors to buy assets at discounted prices, the firm has regarded the latest market downturn as the perfect time to make long-term bets on the crypto industry.

The firm currently boasts over $750 million in assets under management.

Ohanian noted that although crypto is extremely volatile, “there are plenty of people who have that generational consciousness of seeing massive inflation,” which makes crypto’s volatility much more palatable.

2023 could be a rocky year for crypto venture investments: Galaxy Research

Around $30 billion was invested into crypto and Web3 startups in 2022, but will it be repeated this year?

Last year was a big one for crypto venture capital despite multiple high-profile meltdowns and the FUD (fear, uncertainty, and doubt) tsunami that followed. However, the funds may not flow as easily this year, a crypto researcher warns.

The number of deals and amount invested by venture firms into Web3 and crypto startups was a little over $30 billion in 2022, according to Galaxy Research

Galaxy’s head of firmwide research, Alex Thorn, described it as a “monster year” that was only just eclipsed by the $31 billion in VC investments in 2021.

However, in a Jan. 5 report, Thorn stated that macroeconomic and crypto market conditions led to significant investment drawdowns in Q3 and Q4. This will likely continue into 2023, until macro and crypto market conditions improve.

Thorn noted that there were 2,900 venture deals in 2022, though the fourth quarter saw the fewest deals and the lowest capital invested in two years.

If this trend continues, crypto and Web3 firms may struggle to raise funds in 2023, Thorn suggested.

“The macro, monetary, and crypto asset environment portends a difficult year ahead for all involved.”

He added that declining company valuations and stricter demands from investors will bring about a more difficult fundraising environment for entrepreneurs.

“Startups will need to be laser-focused on fundamentals, taming operational expenses and driving revenue in 2023,” he continued.

The United States regulatory environment will also have implications since America still dominates the crypto-startup ecosystem.

More than 40% of all crypto venture capital deals last year involved a U.S.-headquartered startup, according to the report.

“The continued importance of the U.S. to these markets, and its leading position, provide ample reason for U.S. policymakers to clarify and codify rules and regulations for the emerging space.”

Related: Investors chase Web3 as blockchain industry builds despite bear market

Investor dispositions and crypto markets are cyclical, however.

Gene Frantz, a general partner at Google and Alphabet’s independent growth fund CapitalG, told Forbes last month that the 2023 year-end outlook and headlines will look a lot better than today’s.

“The current news cycle may be rough, but persistence and innovation combined with an improving economic outlook will restore the optimism that has always defined our [venture capital] industry.”

In a Jan. 5 report, Crunchbase also alluded to a slower 2023 for venture funding across all sectors. In 2022, global venture funding fell 35% from 2021, but the crypto sector remained buoyant for the year, offering a glimmer of hope for the year to come.

Chinese VC loses $42M in crypto due to compromised mnemonic seed phrase

Bo Shen previously suffered another devastating hack to his personal wallet in 2016.

According to a new twitter post on Nov. 23, Bo Shen, general partner of the Vitalik Buterin-advised venture capital fund Fenbushi Capital, claime that $42 million worth of funds were drained from his Trust Wallet on Nov. 10. Shen, who grew up in China but now lives in Atlanta, says that the funds were his personal assets and the exploit does not affect Fenbushi-related entities.

“The incident has been reported to the local law enforcement. FBI and lawyers both have been involved. Civilization and justice will eventually prevail over barbarism and evil. This is the iron law of human society. It’s just a matter of time.”

Later today, blockchain analytics firm SlowMist confirmed the exploit and stated the reason for theft being “mnemonic words compromise.” The firm also disclosed that a combination of addresses belonging to Shen was drained of 38,233,180 USD Coin (USDC), 1,607 Ether (ETH), 719,760 Tether (USDT), and 4.13 Bitcoin (BTC). The stolen funds were later deposited to exchanges ChangeNow and SideShift.

“In addition, we have verified during our investigation that @boshen1011‘s Trust Wallet is the official version and not a fake wallet. Trust Wallet itself has no security issues related to this theft.”

On Twitter, Shen thanked users for their supportive comments and reiterated his “commitment to blockchain technology and decentralized services.” The last recorded hack of Bo Shen’s wallets took place on Dec. 8, 2016, after hackers gained unauthorized access to a database backup from forum.ethereum.org. Shen, an early investor in Ethereum and Augur, had both tokens drained from his wallets, which were sent to an instant exchange service on Poloniex. A portion of the funds has since been recovered.