The last few months have seen a lot of bad news coming out of the digital asset space, with cryptocurrencies entering a bear market, multiple platforms seeing financial challenges, and at least one major crypto hedge fund going bankrupt.

Despite the bad news, investments in digital asset companies and funds – and crypto startups in particular – are not stopping (though yes, there is a slowdown). 

Most recently, Multicoin Capital launched a $430 million venture fund, which will primarily invest in early-stage crypto- and blockchain-focused companies. In June, Multicoin also led the $60 million Series A funding round for Delphia, an algo-advisor startup.

Also making a potential big splash is FTX Ventures, the investment arm of crypto exchange FTX. (FTX has been instrumental in supporting the crypto market amid recent volatility and CEO Sam Bankman-Fried clearly sees growth opportunities.) Reportedly, FTX Ventures is leading a Series B round for Mysten Labs, which is developing Web3 infrastructure. 

In late May, Andreesen Horowitz announced a $4.5 billion fund that will invest in crypto and blockchain companies. The firm’s fourth (and largest) crypto fund brings its total raised to $7.6 billion.

Why Invest During a Bear Market

Bear markets often mean down rounds and significant losses for existing investors, especially those that bought at the top of the previous market cycle. However, they also offer opportunities to buy into great companies at a discount, leading to significant returns in the future. 

For startups, securing funding will often be more difficult, with potential investors being more risk-averse and performing more expensive due diligence. At the same time, though somewhat counterintuitive, a tighter funding environment can make it easier to build a great business. With fewer startups to compete with, there will be less of a battle for talent, while investors will not put as much pressure on founders to raise more capital. Instead, founders will be pressured to be more disciplined with the funds that they have and will be able to focus more on building the company than on trying to raise more funds.

Bear markets also offer an opportunity to acquire digital assets at discounted prices. During the previous crypto bear market in 2018, investors were able to buy Bitcoin for less than $3,500 and could have seen as much as 20x returns if they sold at the top of last year’s bull run. 

Making Investment Decisions During The Current Bear Market

Digital asset investors in 2022 – and institutional investors in particular – have much better tools for analyzing potential risk, identifying opportunities, and performing due diligence than in 2018.

One of the most significant changes is the improvement in the quantity and quality of digital asset data. Access to this data makes evaluating key metrics for a token, blockchain, or DeFi protocol easier - enabling informed decisions on whether it makes sense to invest given overall market conditions.

Designed with institutional use cases in mind, the Amberdata platform provides comprehensive crypto exchange and blockchain data across the digital asset ecosystem. We provide data on spot prices across all major exchanges, key blockchain events, wallet balances, network metrics, DeFi analytics, and more.

Request a demo today to find out how Amberdata can help you identify investment opportunities during the current bear market - investments that could provide significant returns over the long term as well as trading opportunities that could drive alpha in the short term.