Venture Capital

Crypto firms facing insolvency ‘forgot the basics of risk management’ — Coinbase

“The issues here were foreseeable and actually credit specific, not crypto specific in nature,” said three department heads at Coinbase.

Department heads at Coinbase have weighed in on the market downturn amid solvency concerns surrounding Three Arrows Capital, Celsius Network and Voyager Digital, saying the crypto exchange had “no financing exposure” to these companies.

In a Wednesday blog post, head of Coinbase Institutional Brett Tejpaul, head of prime finance Matt Boyd, and head of credit and market risk Caroline Tarnok said Coinbase had not engaged in the “types of risky lending practices” exhibited by Three Arrows Capital, Celsius and Voyager, claiming the firms utilized “insufficient risk controls.” According to the three co-authors of the post, crypto companies faced the possibility of insolvency caused by “unhedged bets,” large investments in Terra and overleveraging with venture capital firms.

“The issues here were foreseeable and actually credit specific, not crypto specific in nature,” said Tejpaul, Boyd, and Tarnok. “Many of these firms were overleveraged with short term liabilities mismatched against longer duration illiquid assets. We believe these market participants were caught up in the frenzy of a crypto bull market and forgot the basics of risk management.”

A court in the British Virgin Islands reportedly ordered the liquidation of Three Arrows Capital. Voyager Digital filed for bankruptcy in July, later announcing that its plan to restore users’ crypto could depend on funds from any proceedings with Three Arrows Capital, which failed to repay 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) loans. Celsius also filed petitions for Chapter 11, with the platform’s lawyers using an unusual legal argument to avoid restoring users’ funds.

Related: Coinbase secures crypto asset service provider approval in Italy

Though Coinbase said it had a record of “no exposure to client or counterparty insolvencies” and “no changes in access to credit” for its users, the crypto exchange is still operating within a bear market that Grayscale predicted could last until 2023. Since May 4, shares of Coinbase stock have fallen more than 42% to reach $75.27 at the time of publication. CEO Brian Armstrong also announced in June that the exchange planned to cut 18% of its staff, citing concerns about a possible crypto winter.

Singapore’s financial watchdog pushes back against Terra and 3AC associations

According to the MAS managing director, TerraForm Labs, Luna Foundation Guard and Vauld were “not licensed or regulated” by Singapore’s financial watchdog.

Ravi Menon, the managing director of the Monetary Authority of Singapore, or MAS, said companies often labeled by the media in connection to the recent market volatility as “Singapore-based” were not representative of the country’s approach to crypto regulation.

In a speech on the MAS Annual Report on Tuesday, Menon said crypto-related companies including TerraForm Labs and Three Arrows Capital, or 3AC, had “little to do” with crypto regulation in Singapore. According to the MAS managing director, Three Arrows Capital was not regulated under the country’s Payment Services Act and had “ceased to manage funds in Singapore” prior to reports it failed to meet margin calls.

Menon also pushed back against associations with TerraForm Labs and Luna Foundation Guard — the platforms behind TerraUSD (formerly UST) depegging from the U.S. dollar — saying the firms were “not licensed or regulated by MAS, nor have they applied for any licence or sought exemption from holding any licence.” Crypto lending firm Vauld, which suspended withdrawals, trading and deposits in July, has applied for a license to operate in Singapore but was operating unlicensed along with Terra and Luna amid the market downturn.

“The crypto industry globally is still evolving and regulation is still catching up with industry trends,” said Menon. “Singapore is often seen as being at the forefront, with a clear licensing and regulatory framework. But the focus of crypto regulation to-date in Singapore, as well as in most major jurisdictions, has been on containing money laundering and terrorist financing risks.”

The MAS managing director added that the financial watchdog would be consulting on measures aimed at a regulatory framework covering “consumer protection, market conduct, and reserve backing for stablecoins” in the next few months. In July, Singapore senior minister and MAS chair Tharman Shanmugaratnam hinted at rules limiting crypto investments for retail traders and the use of leverage for crypto transactions.

Related: Why Singapore is one of the most crypto-friendly countries

MAS chief fintech officer Sopnendu Mohanty said in June that the regulator would “be brutal and unrelentingly hard” on crypto firms exhibiting bad behavior. The financial watchdog later reprimanded 3AC for providing false information, alleging the company had assets under management in excess of the permitted amount under regulatory guidelines.

“MAS and relevant government agencies will take firm enforcement action if any entity is found to be conducting illegal activities or performing regulated activities without a licence,” said Menon.

Web3 dominates venture capital interest in blockchain industry in Q2 2022

All the deals, trends, moves and investments in Q2 2022 across the blockchain landscape are contained in the latest Cointelegraph Research report.

Cointelegraph Research brings an analysis of all the deals and trends from venture capital (VC) in the blockchain industry during the second quarter of 2022.

When looking at the aggregate total amount invested into the crypto industry in the second quarter, it will tell one story. However, a deeper dive into the data tells another tale. From a high level, the $14.67 billion invested in Q2 is about flat with the $14.66 invested in Q1. But, the largest chunk of that investment was in April, before the last two months of a large slump in global markets, which made even the most bullish crypto investor admit the bear market has arrived.

The good news is that even though this did happen, funds like Andreessen Horowitz (a16z) closed a $4.5 billion crypto fund, and investment continued to flow into different sectors of the crypto industry.

Download the full report here, complete with charts and infographics.

The Cointelegraph Research Terminal has a VC database that contains comprehensive details on deals, mergers and acquisition activity, investors, crypto companies, funds and more. Using this database, Cointelegraph Research analyzes the numbers to find the important trends in the industry. The report is just an overview of the highlights of the last quarter — not everything can fit into the 12-page quarterly report.

The numbers can lie

The total dollar value of individual deals in the blockchain industry remained flat at $14.67 billion for Q2, just barely over Q1’s $14.66 billion. This can point to an inaccurate conclusion that there is no change in VC investment trends, and everything is on a massive exponential growth curve.

The slump in traditional finance (TradFi) markets has been a headwind for the crypto markets. The risk-on to risk-off change has had a surprising impact on different sectors of the crypto sphere. These downward market pressures were only exacerbated by the collapse of Terra’s stablecoin, which brought down the overall market capitalization considerably. Macroeconomic forces have impacted venture capital firms to take a slight step back and approach projects with more caution and probably less capital allocation to reduce their risk exposure in the case of backing a bad project.

The number of individual deals in the blockchain industry was over 620, up a hundred more than the previous quarter. But, the average value of each deal decreased by over 16% to $26.8 million, perhaps indicating more risk-averse behavior on the part of VC and investment firms. So, while the data shows signs of a slow down in investment inflows in the crypto space, the interest to help build the next generation of blockchain and crypto products appears to still be strong.

Web3 becomes the sector of most interest for VCs

Out of all the overarching sectors in the blockchain industry in decentralized finance (DeFi,) centralized finance (CeFi,) blockchain infrastructure, Web3 and nonfungible tokens (NFT,) DeFi was basically always king for VC capital inflows. That all changed in Q2, when Web3 garnered around 42% of all the individual deals, leaving DeFi in a far distant second at 16%. This trend was highlighted further when analyzing the most active investors, who made around 42% of all deal activity for Q2, a drop from 65% in Q1.

Seven out of the top ten most active VCs chose Web3 as the sector of choice for investment. The push for active involvement of companies to pursue becoming part of the overall concept of the Metaverse is the driving force behind this new trend. In the next report, the Cointelegraph Research team will break down the Web3 sector into its different parts to see where VC interest is headed in the space.

Metaverse investment takes the lead

The top ten deals ranged lower than in the previous quarter but also held a massive $2 billion deal with Epic Games to expand into combining sports experiences and the crypto-metaverse. The Metaverse and Web3 were a running theme in these large deals, and so was the CEO of FTX exchange, Sam Bankman-Fried, becoming something of a “lender of last resort” and providing funds for firms like BlockFi, which was negatively impacted by the recent downturn in the market.

Animoca Brands ahead in the M&A game

Mergers & acquisitions (M&A) can provide great strategic opportunities for companies, especially in times of turmoil. Animoca Brands seems to take these strategic opportunities seriously, acquiring three companies in the GameFi space and others in education and marketing.

Two big names also were involved in the acquisitions — eBay and Napster. eBay acquired Known Origin — a nonfungible token (NFT) marketplace — to help expand its product offerings to customers. Algorand and Hivemind acquired Napster to promote the music NFT market to improve access for consumers and music creators.

The report pulls from Cointelegraph Research Terminals’ expansive database along with analysis from Michael Tabone, a senior economist from Cointelegraph Research. Michael has an extensive background in economics, business, finance, cryptocurrency, blockchain technology and working with emerging technologies. Besides working for Cointelegraph Research, Michael is a Ph.D. candidate working on his dissertation, which is focused on the theory and application of decentralized autonomous organizations, or DAOs.

Keychain Ventures is a crypto investment firm that engages in investing different funds in the blockchain space. Keychain Ventures, along with Cointelegraph Research, will be presenting quarterly interviews with VC firms as well as crypto/blockchain projects that have recently gone through a funding round. These interviews will open up different viewpoints of investment practices from all parties.

This article is for information purposes only and represents neither investment advice nor an investment analysis nor an invitation to buy or sell financial instruments. Specifically, the document does not serve as a substitute for individual investment or other advice.

Crypto Biz: 3AC’s founders are nowhere to be found

Liquidators don’t know the whereabouts of Kyle Davies and Su Zhu. Meanwhile, Grayscale’s legal officer says the asset manager’s lawsuit against the SEC could take a while to play out.

In the world of crypto, there’s no such thing as “too big to fail.” Three Arrows Capital, once the most recognizable hedge fund in the industry, has essentially gone belly-up after its founders believed their own hype and decided to go full-degen mode during the worst macro climate of a generation. Since the proverbial shit hit the fan last month, founders Kyle Davies and Su Zhu have kept a very low profile. So low, in fact, that their whereabouts remain a mystery, according to court documents. 

This week’s Crypto Biz chronicles the latest developments surrounding Three Arrows Capital and explores Grayscale’s legal proceedings against the United States Securities and Exchange Commission (SEC).

Liquidators can subpoena 3AC founders despite ‘tricky issues’ with crypto assets

We may not know the whereabouts of Kyle Davies or Su Zhu, but that won’t stop liquidators from subpoenaing the founders of bankrupt Three Arrows Capital, also known as 3AC. Earlier this week, United States bankruptcy judge Martin Glenn issued an order giving 3AC liquidators permission to demand that the founders attend court. Apparently, Zhu and Davies haven’t been cooperating with their liquidators. Zhu broke his nearly one-month silence this week by alleging that the liquidators “baited” his firm. Whatever that means.

Grayscale legal officer says Bitcoin ETF litigation could take two years

Grayscale’s quest for a Bitcoin (BTC) exchange-traded fund (ETF) could get more complicated as the asset manager embarks on suing the SEC for denying its latest application. Specifically, Grayscale is trying to convert its GBTC product into an ETF, but securities regulators won’t let them because of “concerns” about manipulation in the spot BTC market. Craig Salm, Grayscale’s chief legal officer, said the litigation process could take up to two years before a resolution is reached. Who knows, by that time, the SEC may decide to waive its magic wand and approve another spot Bitcoin ETF.

Multicoin Capital raises $430M for new crypto startup fund

Crypto venture funding has slowed in recent months, but that hasn’t stopped major firms from continuing to raise serious capital. Prominent investor Multicoin Capital announced this week that it has launched a massive $430 million fund to bootstrap crypto and blockchain startups. The firm’s new “Venture Fund III” will allocate between $500,000 and $25 million to early-stage companies, with an increasing focus on decentralized autonomous organizations, the creator economy and consumer-facing products. 2022 is shaping up to be the biggest funding year ever for crypto.

Playboy to launch first ‘MetaMansion’ in The Sandbox

Iconic lifestyle brand Playboy is entering the Metaverse — and doing it tastefully, too. The company behind your dad’s favorite raunchy magazine has launched its first MetaMansion in The Sandbox, giving users access to a virtual version of the Playboy mansion. If you decide to pay a visit to the virtual property, you’ll be able to attend a host of gaming and social events and possibly collect nonfungible tokens (NFTs) in the future. Apparently, the MetaMansion builds on Playboy’s Rabbitar NFT project, which is comprised of 11,953 tokenized bunny avatars.

Don’t miss it! Why are crypto platforms going bankrupt?

The cryptocurrency market may never be the same after 2022 — and that could be a good thing or a bad thing. With companies like Voyager Digital, Three Arrows Capital and Celsius filing for bankruptcy, investors are worried about what comes next. Is your crypto safe being held on exchanges or lending platforms? In this week’s Market Report, I sat down with fellow analysts Jordan Finneseth, Marcel Pechman and Benton Yaun to discuss how the recent wave of bankruptcies will impact the market.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Multicoin Capital raises $430M for new crypto startup fund

Even with Bitcoin, Ether and altcoins in a bear market, venture funding for the blockchain industry continues to grow.

Prominent crypto investor Multicoin Capital has launched a new venture fund valued at $430 million, further demonstrating venture capital’s growing interest in the blockchain economy amid the bear market. 

Multicoin’s Venture Fund III will invest between $500,000 and $25 million in early-stage companies across various crypto- and blockchain-focused industries, the company announced Tuesday. It’s also willing to invest values of up to $100 million or greater for later-stage projects with an established brand and market presence.

Related: VC Roundup: ‘Web5,’ Metaverse sports and Bitcoin monetization startups generate buzz

Venture Fund III will place greater emphasis on crypto projects that have demonstrated “proof of physical work,” or protocols that have created economic incentives for permissionless contribution.

“While the vast majority of crypto-innovation has been focused on coordinating digital communities and economies, tokens also create opportunities for innovation in capital formation and human coordination that extend beyond the digital world and into the physical,” Multicoin wrote.

The company also highlighted data decentralized autonomous organizations, also known as data DAOs, as offering strong incentives for user participation. As Cointelegraph reported, Multicoin Capital was a key investor in the data DAO project Delphia, which closed a $60 million Series A funding round in June.

Creator monetization, a category that includes social tokens, nonfungible tokens and decentralized finance, was also cited as a major investment theme moving forward.

Related: What are the top social tokens waiting to take off? | Find out now on The Market Report

As investors brace for more short-term pain in the cryptocurrency markets, venture firms continue to add to their portfolios. In the first quarter alone, $14.6 billion in venture funding flowed into crypto and blockchain startups, according to Cointelegraph Research. Although funding is expected to have declined in the second quarter, 2022 is shaping up to be a record year for venture funding.

Animoca Brands raises $75M to advance ‘open metaverse’ concept

The company behind The Sandbox continues to attract sizable investments as it eyes new acquisitions in the play-to-earn and metaverse sectors.

Blockchain gaming and venture studio Animoca Brands has closed another strategic funding round, giving the company additional resources to expand its acquisition targets in the metaverse sector. 

The company announced Tuesday that it has closed a $75.32 million funding round at a pre-money valuation of $5.9 billion backed by Liberty City Ventures, Kingsway Capital, Alpha Wave Ventures, 19T, SG Spring Limited Partnership Fund and others. The raise represents the “second tranche” of funding following a $358.8 million raise in January that was supported by venture giants Sequoia China, Winklevoss Capital, ParaFi Capital and 10T Holdings.

Animoca said the new capital will fund strategic acquisitions, product development and intellectual property licenses as it looks to advance the so-called “open metaverse” concept. The company said it plans to continue using blockchain technology, including nonfungible tokens (NFTs), decentralized finance and GameFi, to promote digital property rights.

Despite the presence of a bear market in digital assets, Animoca has been actively expanding its portfolio in 2022. In April, the venture studio acquired a large stake in Australian digital marketing firm Be Media — a move designed to expand partnerships with the local blockchain industry. The same month, Animoca purchased video game publishers Eden Games and Darewise Entertainment.

Related: VC Roundup: ‘Web5,’ Metaverse sports and Bitcoin monetization startups generate buzz

Animoca subsidiary The Sandbox (SAND) has played a leading role in advancing the still-nascent metaverse industry. As Cointelegraph reported, American lifestyle and entertainment brand Playboy recently announced the launch of a “MetaMansion” in The Sandbox — a virtual mansion that will give users the ability to participate in a host of gaming and social events.

The Sandbox currently has a total market capitalization of $1.4 billion, making it the second-largest metaverse project behind Decentraland, according to CoinMarketCap.

VC Roundup: ‘Web5,’ Metaverse sports and Bitcoin monetization startups generate buzz

PolySign, Mash, Floor, Euler, Trinsic, KYVE and Atmos Labs headline the latest funding deals from the world of blockchain and cryptocurrency.

A lot has happened in the Bitcoin (BTC) and cryptocurrency markets since our last edition of VC Roundup. The monumental collapse of the Terra ecosystem spilled over into other segments of the digital asset market, exposing over-leveraged traders, lending platforms and venture capital funds. In the process, Bitcoin’s price plumbed new lows, falling below the previous cycle’s peak for the first time in its history. 

Despite macro headwinds inflicting pain on the crypto markets, venture capital firms are still investing in the industry’s most promising startups. The latest edition of VC Roundup highlights funding deals for digital asset infrastructure providers, non-custodial crypto protocols, payment solutions and decentralized identity management companies.

Digital asset infrastructure provider closes $53M round

PolySign’s quest to bring institutional-level crypto custody solutions to investors has received backing from several venture capital firms. The firm recently raised $53 million in Series C financing backed by Cowen Digital, Brevan Howard, GSR and more. In addition, the company secured a $25 million credit facility from venture firm Boathouse Capital. Although PolySign didn’t specify how the funding will be allocated, the Series C was closed around the same time that the firm acquired digital asset fund administrator MG Stover.

Related: Goldman Sachs downgrades Coinbase stock to ‘sell’

Bitcoin startup raises funds to monetize creator economy

Bitcoin and Lightning Network payments platform Mash raised $6 million in seed funding in June as part of its ongoing efforts to remonetize the internet for developers and content creators. The funding round was co-led by Nic Carter’s Castle Island Ventures and Whitecap Venture Partners, with additional participation from Maple VC, Strategic Cyber Ventures, Aquanow and Spacecadet Ventures. The Mash platform allows developers and content creators to offer customers so-called “pay-as-you-enjoy” pricing options facilitated by BTC and Lightning Network.

NFT app Floor raises $8M

Nonfungible token application Floor has closed a Series A investment round valued at $8 million to advance its mission of making NFTs more accessible to mainstream users. The funding round was led by 6thMan Ventures, with additional participation from B Capital, Worklife Ventures, Collab+Currency, Crypto.com and others. Floor said it will use the funding to accelerate development and bring more utility to NFTs.

Euler receives major backing

Non-custodial crypto protocol Euler has closed a $32 million funding round that was led by Haun Ventures and included participation from FTX Ventures, Coinbase Ventures, Jump Crypto, Jane Street, Uniswap Labs and others. The funding will be injected into the treasury of Euler’s decentralized autonomous organization, or DAO, which is being rolled out in three phases. Euler is a decentralized finance protocol built on Ethereum that allows users to lend and borrow crypto assets.

“Web5” and decentralized identity attract VC interest

Decentralized identity protocol Trinsic recently closed an $8.5 million seed round to continue building its so-called user-controlled identity products. A spokesperson for the company said Trinsic’s products give real-world utility to Jack Dorsey’s “Web5” ambitions. A vocal critic of Web3, the former Twitter CEO announced in June that he is bypassing the third iteration of the internet in favor of “Web5”, a new Bitcoin-centric model for identity management.

Related: VC Roundup: The rise of blockchain gaming, DAO management and asset tokenization

KYVE closes $9M raise ahead of mainnet launch

Web3 archiving protocol KYVE has raised $9 million in funding ahead of a planned mainnet launch slated for the fourth quarter of 2022. The funding round, which had participation from Distributed Global, Wicklow Capital, IOSG Ventures, Blockchain Coinvestors, Huobi Incurabor and others, will be used to integrate more ecosystems into KYVE’s so-called decentralized data lake. Several blockchains currently use KYVE, including Avalanche, Zilliqa, Cosmos and Polkadot.

Atmos Labs targets Metaverse sports with seed raise

Play-to-earn developer Atmos Labs has closed an $11 million seed round to continue building Metaverse-focused sports games. The investment round was led by NFT-focused venture firm Sfermion, with additional participation from Animoca Brands, Collab+Currency, FBG Capital, CoinGecko Ventures and several others. Atmos Labs is looking to bring e-sports to a global audience by creating immersive gameplay in the Metaverse.

Crypto Biz: Crypto broker goes bankrupt, Bitcoin miner capitulates and China VC funding soars

As the search for an elusive Bitcoin bottom continues, at least one United States miner was forced to liquidate a portion of its holdings in June.

Those of us anxiously awaiting a summer relief rally for Bitcoin (BTC) may have to wait a little while longer. The bear market is still cleansing us of our excess — and revealing the most toxic players in our industry. I’ve talked to you about Terra (LUNA) — now renamed Terra Classic (LUNC) — Celsius, Three Arrows Capital, BlockFi — what about Voyager Digital? The crypto broker filed for Chapter 11 bankruptcy this week, putting hundreds of thousands of creditors on high alert. 

This week’s Crypto Biz newsletter dissects Voyager’s bankruptcy proceedings and offers some potentially good news regarding Celsius. We also look at the latest high-profile miner to force-sell their Bitcoin and chronicle new capital raises for one of China’s most prominent venture firms.

Celsius pays down 143M in DAI loans since July 1

Celsius appears to be inching closer to repaying its outstanding debt to Maker (MKR) protocol after the crypto lender posted $142.8 million worth of Dai (DAI) stablecoins over a four-day period. Celsius paid back another $34.4 million in DAI on July 5, effectively boosting its collateralization ratio and significantly lowering its liquidation price to below $3,000 worth of Bitcoin (BTC). In other words, Bitcoin’s price would now need to fall below $3,000 for Celsius to default on its loan. Although some observers took the news as cautious optimism that Celsius is headed in the right direction, the firm hasn’t issued any new updates in weeks and user withdrawals are still frozen as of June 13.

Voyager Digital files for Chapter 11 bankruptcy, proposes recovery plan

Another one bites the dust: Crypto broker Voyager Digital filed for Chapter 11 bankruptcy in the Southern District Court of New York mere days after the firm halted all trading activity. Voyager’s bankruptcy filing stated that the firm owed more than 100,000 creditors anywhere from $1 billion and $10 billion in assets. If you’re a Voyager account holder, there may be a silver lining: The company is filing for bankruptcy as part of a “reorganization” plan that should eventually pave the way for clients to reaccess their accounts. Crypto market contagion is a real thing — and it may not be over just yet.

Core Scientific sold $167M worth of Bitcoin holdings in June

Miner capitulation is upon us. Earlier this week, United States crypto mining operation Core Scientific revealed that it was forced to sell more than 7,000 BTC in June to pay for ongoing business expenses. The digital gold was offloaded at an average price of $23,000, some 67% lower than Bitcoin’s all-time high from last November. The good news is miner selling is often seen as a reliable indicator of the bottom. But, fewer investors are prepared to call the bottom as the Federal Reserve plots several more aggressive interest rate hikes this year.

Crypto investor Sequoia Capital China reportedly raises $9 billion

In the depths of crypto winter, at least one venture capital firm continues to grow its war chest. Sequoia Capital China, the Chinese affiliate of crypto-focused venture firm Sequoia Capital, is reportedly raising $9 billion for four startup funds. Although details remain sparse, it was reported that 50% of the raise was oversubscribed. It remains to be seen how the funds will be deployed, but given that Sequoia China has already backed blockchain plays such as Babel Finance and DeBank, we can expect blockchain and crypto startups to be well represented.

Don’t miss it! What’s the current state of the crypto market?

Is the bear market affecting your psyche? How much longer until we hit bottom, or have we already? In this week’s Market Report, I sat down with fellow analysts Jordan Finneseth, Yashu Gola and Benton Yaun to discuss the current state of the crypto market and why July is going to be a pivotal month for risk assets. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Crypto investor Sequoia Capital China reportedly raises $9 billion

Sequoia China is known for backing many crypto firms, including the troubled crypto lender Babel Finance, which halted withdrawals in mid-June.

Sequoia Capital China, the Chinese affiliate of cryptocurrency-friendly venture capital firm Sequoia Capital, is about to raise $9 billion for its four new funds focused on Chinese startups.

In raising the capital, Sequoia China has already exceeded its initial target of roughly $8 billion, The Information news agency reported on Monday, citing two people familiar with the matter.

The report notes that the final amount of the raise is supposed to be the biggest pool of capital ever raised by a single VC firm focused on Chinese technology startups.

The funding round signals the growing investor appetite for tech investment in China coming despite a major decline in the stock market as well as China’s crackdown on tech companies, which triggered a slowdown in investments by Sequoia’s global competitors.

Sequoia China reportedly plans to close the round sometime this week, with 50% of the raise being oversubscribed.

According to some local investors, major VC firms like Sequoia China and Hillhouse were still raising money despite many American wealth and pension funds halting China investments in 2022.

“Only Sequoia and Hillhouse can raise money from international investors right now, they see it as lower risk, like making an index fund investment,” one Beijing-based investor reportedly said.

Founded in 2005, Sequoia China is one of the world’s biggest tech VC firms, known for investing in TikTok operator ByteDance.

Related: Crypto lending platform Babel Finance reaches counterparty debt agreement

Sequoia China has also backed a number of crypto and blockchain-related firms, including the troubled Asian crypto lender Babel Finance, which halted withdrawals in mid-June amid the ongoing crypto lending crisis. As previously reported, Sequoia Capital China was among lead investors in a $40 million Series A funding round in Babel Finance in May 2022.

Sequoia China also previously led funding rounds for other industry platforms like the cryptocurrency wallet DeBank in 2021.

Crypto Biz: Coinbase downgraded, 3AC deemed insolvent and Michael Saylor buys the dip

Coinbase, Three Arrows Capital and MicroStrategy headline the latest business news from the world of blockchain.

Coinbase has long been considered an important bellwether of the cryptocurrency market. Last year, when the company was expanding its workforce, adding institutional clients and issuing stock, crypto prices were hitting record highs. Now, in the depths of crypto winter, Coinbase finds itself slashing a fifth of its workforce, losing retail trading volume and contending with downgrades of its credit and stock.

This week’s Crypto Biz dissects Goldman Sachs’ latest downgrade of Coinbase and also looks at the latest developments surrounding Three Arrows Capital.

Goldman Sachs downgrades Coinbase stock to ‘sell’

After a promising debut on the Nasdaq stock exchange in April 2021, it has been nothing but down for Coinbase shares. The company, which once had a fully diluted market capitalization of nearly $100 billion, has been caught in a downward spiral amid crypto winter. Recognizing the 80% decline in Coinbase stock, analysts at Goldman Sachs this week downgraded the company to “sell,” which is basically a recommendation that investors liquidate their positions and be done with the stock for now. Goldman isn’t the only firm turning bearish on Coinbase. Earlier this month, credit rating agency Moody’s downgraded the company to a Ba3 rating, which is considered a non-investment grade.

21Shares responds to bear market with crypto winter ETP

Swiss asset manager 21Shares is gearing up for crypto winter by launching a new product that allows investors to gain low-cost exposure to Bitcoin (BTC). Earlier this week, the company introduced its 21Shares Bitcoin Core exchange-traded product, also known as CBTC. What makes CBTC so unique is its paltry expense ratio of just 21 basis points, which is 44 basis points below the next cheapest product on the market. Basically, 21Shares wants you to keep stacking sats — or buying shares in its ETP — during the market downturn. Unless you think Bitcoin is dead, the best time to accumulate is during bear markets.

British Virgin Islands court reportedly orders to liquidate 3AC

The brain trust behind Three Arrows Capital, also known as 3AC, has been radio silent over the past few weeks amid reports that the hedge fund is bankrupt. On June 27, a court in the British Virgin Islands ordered that 3AC be liquidated, setting the stage for further volatility in the cryptocurrency market. Although details were sparse, the liquidation ruling came shortly after the crypto exchange Voyager Digital handed 3AC a notice of default for its failure to pay back a massive loan that included 15,250 BTC and 350 million USD Coin (USDC). Buckle up, ladies and gents, the next few months are going to be ugly.

MicroStrategy scoops up 480 Bitcoin amid market slump

Concerns about Michael Saylor’s conviction on Bitcoin were laid to rest this week after the MicroStrategy CEO announced that his company had acquired an additional 480 BTC for $10 million. MicroStrategy is now sitting on a colossal 129,699 BTC valued at a combined $3.98 billion. Given its average purchase price of $30,644 per BTC, the company has a net unrealized loss of around $1.4 billion tied to Bitcoin. With crypto winter only just beginning, it could take years for MicroStrategy to break even on its holdings. Saylor is as unfazed as ever, though.

Don’t miss Where is Bitcoin headed next?

Bitcoin’s paltry rally toward $22,000 earlier this week had some investors excited that a short-term breakout was imminent. Well, that didn’t happen. Now, investors are wondering whether we will see $30,000 or a sub-$17,000 BTC first. In this week’s Market Report, I got to dissect the latest market developments with fellow analysts Jordan Finneseth, Benton Yuan and Marcel Pechman. You can catch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.