A16z Sees Devastating Crypto Crash as a $4.5 Billion Investment Opportunity

In the midst of a “crypto winter,” VC firm Andreessen Horowitz is still burning cash to keep the industry warm. 

On Wednesday, the firm—also known as a16z—announced it had raised $4.5 billion for its fourth crypto fund despite an ongoing price crash that has wiped out over $1.6 trillion of value from the markets.

“We’re going to use these funds to invest in promising web3 startups at every stage,” a16z co-founder Chris Dixon wrote in the Crypto Fund IV announcement blog. “We are excited about developments in web3 games, DeFi, decentralized social media, self-sovereign identity, layer 1 and layer 2 infrastructure, bridges, DAOs & governance, NFT communities, privacy, creator monetization, regenerative finance, new applications of ZK proofs, decentralized content & story creation, and many other areas.”

There are few firms that have been as bullish on crypto as a16z, which has raised a grand total of $7.6 billion. A16z led a $450 million funding round for Yuga Labs, valuing the company behind the Bored Ape Yacht Club NFT collection and disastrous Otherside “metaverse” NFT launch at $5 billion. Last October, a16z financing for Axie Infinity, the play-to-earn digital sharecropping game that was lauded by the industry before its in-game economy collapsed and North Korea hacked it for $600 million, leading to a16z helping raise a partial bailout to the tune of $150 million.

It’s no surprise that crypto funds are some of the industry’s largest advocates despite the downturn. As Hannah Miller pointed out in Bloomberg’s Crypto newsletter, the largest 9 out of the industry’s top 10 investors are “crypto-native” firms, meaning investors that bought crypto before other asset classes—as a result, “they need to keep believing, because for them it’s the only game in town.” Still, a16z isn’t your average crypto-native venture capital firm. With its own media company, research arm, and investment portfolio full of poorly-performing public companies, Andreessen Horowitz has doubled down on crypto in a way that other funds and investors haven’t.

Just last week, the firm published its first State of Crypto annual report—a document that described the $1.6 trillion worth of value crypto markets have lost over the past six months as “dark days” and a “winter,” but painted the downturn as a time to build. 

“Markets are seasonal, crypto is no exception. Summers give way to the chill of winter, and winter thaws in the heat of summer,” a16z wrote in its report’s summary. “Advances made by builders during the dark days eventually re-trigger optimism when the dust settles. With the recent market downturn, we may be entering such a period now.”

In that report, as well as on its website, a16z clings to the oft-repeated “thesis” that these are crypto’s early days or its development is analogous to that of “the modern internet.”

“We are now beginning the third era of the internet—what many call web3—which combines the decentralized, community-governed ethos of the first era with the advanced, modern functionality of the second era,” Dixon wrote in the Crypto Fund IV blog. “This will unlock a new wave of creativity and entrepreneurship.”

Bitcoin has been around for more than a decade, and many of the technologies hailed as central to web3—from stablecoins, to NFTs, and smart contracts—have been with us for nearly as long In the meantime, the industry has continued to be rife with exploits, scams, fraud, and a struggle to find use cases outside of crypto’s ecosystem that don’t amount to risky gambles on speculative assets. 

But maybe, this time, throwing billions of more dollars will change that. A16z certainly seems to hope so.

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