A recent Wall Street Journal article brought to light that venture capital firm A16z’s flagship crypto fund shaved around 40% of its market value in the first half of 2022. Per the report,
“That decline is much larger than the 10% to 20% drops recorded by other venture funds, which have largely avoided the risky practice of purchasing volatile cryptocurrencies, according to fund investors.”
Here it is worth recalling that back in May, the firm launched its largest crypto fund at $4.5 billion. The establishment of the said fund brought A16z’s total crypto and Web3 HODLings up to $7.6 billion.
The long-term horizon
The largest fund was launched during the sluggish phase of the market, with top assets like Bitcoin and Ethereum at less than their half of last year’s Q4 highs. In fact, DeFi and Web3-related tokens have seen an even larger erosion of their market caps. Chalking out the impact of the same WSJ noted,
“Prices for Bitcoin and other cryptocurrencies have plunged this year in the midst of a broad market downturn, erasing billions of dollars in paper gains for Andreessen’s funds.”
Chris Dixon, a partner at A16z, however, said that he was faithful to the crypto-centric vision of Web3 that underpinned Andreessen’s push into the sector. He outlined that the space was still in its early stages of acquiring users and he was not sure when mass adoption of blockchain services will occur. Nonetheless, he is not concerned about the hiccups because he was eying the long-time frame. He said,
Crypto “is about the political and governing structure of the internet. We have a very long-term horizon.”
The WSJ report further contended that despite the record cash pile, the firm has “dramatically” slowed the pace of its crypto investments this year. Ben Narasin, General Partner at VC firm Tenacity Venture Capital opined,
“They’ve just pushed it so far with crypto that I’m not sure they can rebalance.”
The Solana, Coinbase tangent
With respect to deals, the company is on a slippery slope. It announced nine crypto startup deals in the third quarter, down from a high of 26 crypto deals in the fourth quarter of last year, per PitchBook.
Alongside, the firm’s crypto investments are also dropping. Chalking out the state of its Solana and Coinbase investments, the report highlighted,
Solana, an upstart cryptocurrency that the firm bought in June 2021, has shed over 80% of its value since the beginning of the year. In the first six months of this year, Andreessen lost $2.9 billion of its remaining stake in Coinbase as the crypto exchange’s stock price cratered by more than 80%.
Dixon, however, stated that he does not look at prices. Instead, he looks at the “entrepreneur and developer activity” because that’s the “core metric.”