Andreessen Horowitz’s crypto fund has lost 40% of its value in six months

Andreessen Horowitz is Silicon Valley’s largest cryptocurrency investor. The venture capital company, nicknamed a16z, is also one of the main victims of the current crisis. It now has to deal with investors worried about the prospect of a “crypto winter,” as there may have been for artificial intelligence or virtual reality.

a16z has invested heavily in crypto

It must be said that the company has injected funds into many Web3 companies such as Coinbase, OpenSea or Solana. An initiative led by Chris Dixon, the company’s general partner and chief decision maker of its crypto investments. His influence in the community is considerable and he has significantly contributed to the growth of fundraising at NFT.

So far it has invested over 7.6 billion dollars in this sector. In 2018, it launched a crypto fund totaling $350 million (the first of its kind), followed by a second in 2020 and a third in June 2021, the result of a quick fundraising of $2.2 billion. Last May, the company doubled down by announcing the closing of a new $4.5 billion fund dedicated to the sector, but the timing wasn’t right, with deflation since the stock bubble, technology and bitcoin’s price fade.

Crypto in crisis

Inflation and rates set by central banks are causing parallel currencies to fall. At the time of writing, bitcoin is worth around 20,712 euros, a far cry (-70%) from the nearly 69,000 euros (record value) seen in November 2021, which speaks volumes for the market collapse. Solana, an emerging cryptocurrency that Andreessen Horowitz acquired in June 2021, has lost more than 80% of its value since the beginning of the year.

Many companies supported by a16z are facing a drop in demand. This is especially the case with Coinbase, whose number of users has dropped significantly. In the first six months of the year, Andreessen Horowitz lost $2.9 billion on its remaining stake in the company, which also lost 80% of its value. The demand for NFT, this application of blockchain for the exchange of digital goods, also seems to have been reduced to nothing.

-40% in six months for the main fund a16z

Wednesday, October 27, 2022, Wall Street Journal reports according to “people familiar with the matter” that Andreessen’s flagship crypto fund lost about 40% of its value in the first half of 2022. Overall, the ecosystem is becoming more complicated as regulations tighten in most Western countries. The lack of regulation had by then facilitated the creation of thousands of cryptocurrencies, many of which ended in spectacular failures, often associated with fraud.

As a result, California VC still slowed its investments in the crypto ecosystem, despite the record money. The company announced nine cryptocurrency startup deals in the third quarter of 2022, up from 26 in the fourth quarter of 2021. The company also downgraded its second and third crypto funds this year.

In profit despite everything

But if the balance sheet of the last few months is gloomy, it should not erase the considerable profits already made by Andreessen thanks to cryptocurrencies. The company is behind one of the most profitable bets in venture capital history, returning more than $4 billion worth of stock to investors in the two months since its IPO on the Coinbase exchange with a live listing in April 2021. By the end of 2021, Andreessen Horowitz had multiplied his initial investment by 10.6 times. So even with the current “crypto winter” and the 50-60% loss in bitcoin price, a16z is certainly still profitable…

“A very long-term horizon”

And above all, this does not prevent Chris Nixon from strongly believing in the future of the sector and continuing to invest in it. With confidence maintained, he told the WSJ that he was thinking about “a very long-term horizon” for cryptocurrencies, as the industry “is only in the early stages of user acquisition.”

According to him, the market decline is even “an opportunity for the company to continue supporting crypto entrepreneurs.” “What I look at is not the prices. I look at the activity of entrepreneurs and developers. That is the basic metric,” he continued, staying “true to the cryptocentric view of the Internet called Web3.”

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