Silicon Valley investment powerhouse Andreessen Horowitz (a16z) is aiming to raise up to $450 million for its second VC fund focused on cryptocurrencies, Financial Times reported.
The new fund, which expects to collect required money in a week, signals some investors are still willing to back blockchain projects despite the recent slump in cryptocurrency prices and uncertainty surrounding the Covid-19 outbreak.
Just last week, Three Arrows Capital has invested an undisclosed amount in crypto lending platform BlockFi. The deal comes barely two months after BlockFi raised $30 million in Series B funding led by Valar Ventures, with participation from a host of other investors.
Michael Arrington, a prominent crypto investor and founder of online portal TechCrunch, also announced in 2019 that his Arrington XRP Capital hedge fund secured an additional $30 million commitment from undisclosed existing partners.
The Silicon Valley-based firm moves to vastly expand the scope of its activities nearly two years after it launched its first $300 million crypto fund. Called “a16z crypto,” the fund specializes in crypto-assets and projects that build on blockchains.
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Even before this, Andreessen has been one of the most active investors in cryptocurrency thanks to investments in a number of notable startups. The investor poured money into the industry unicorn Coinbase, Visa-led digital asset custodian Anchorage, hedge fund Polychain Capital, and blockchain-based social payment app Celo.
However, 2018 price dips have been bad news for all crypto investment vehicles, forcing many to shut and others to explore creative ways to stay afloat.
Eurekahedge Crypto-Currency Hedge Fund Index reports that 42 cryptocurrency funds have closed shop since the beginning of 2018. Also, 70 percent of the 740 funds it tracks made losses of about 70 percent on average last year.
Crypto firms have turned to venture capitalists as the collapse in digital asset values has made new investments through ICOs, which were once plentiful, drying up for blockchain-related startups, including the so-called crypto hedge funds. Retail investors who poured money into crypto assets in 2017, seeking to benefit from a sector-wide boom, are now trying to head for the exits — prompting funds to find other alternatives to stay the course.
In addition, matters for crypto funding worsened as ICOs activities have been under pressure globally as regulators crack down on many projects for conducting unregistered securities offerings.