With the bear markets and recession concerns in the US, crypto investors are not having a good time. Despite recovering from the low point in the fourth quarter of 2022, cryptocurrencies have yet to enter the desired upward trend. Fear of returning to $20,000 is increasing among investors. Meanwhile, institutional investors are reducing their risks amidst the uncertainty in Bitcoin prices.
Institutions and Cryptocurrency
Sequoia Capital, a Silicon Valley-based venture capital firm, has decided to downsize its funds amidst the uncertainty in the markets. In response to the sharp turn in private markets, the firm has reduced two funds, including the crypto fund raised last year.
The size of the crypto fund has been reduced from $585 million to $200 million, while the ecosystem fund that supports smaller venture funds or individual investors has been halved from $900 million to $450 million. The decrease in fund size, which was announced to limited partners in March of this year, comes in the midst of a significant decline for private technology companies and liquidity crunch for some limited partners.
Sequoia Capital
Sequoia has undergone significant changes this year. In June, it announced the separation of its highly successful China unit due to increasing tensions between the US and China. Earlier this month, partner Michael Moritz announced his resignation after 38 years at Sequoia.
Roelof Botha, managing partner of Sequoia, said that Moritz had contributed to the establishment of Sequoia as one of the world’s leading technology investment groups. After more than a decade of ballooning fund scope and scale, the firm is repositioning itself at a time when private markets are resetting, posing a danger to venture capitalists.
Sequoia’s ecosystem and crypto investment funds were announced in early 2022, when the venture market was on the rise. Since then, rising interest rates and declining economic confidence have hit startup valuations, reduced public listings, and halted venture investments.
There has also been a renewed outflow from institutional crypto funds. With uncertainty about how much tighter the Fed will become, investors are now wondering if there will be a major crash by the end of 2023.
