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Crypto Gloom Delves into JPMorgan Team’s Venture Capital Alert

A cut in venture capital funding for the digital asset sector is the latest sign that a longer slump in crypto markets may lie ahead.

A cut in venture capital funding for the digital asset sector is the latest sign that a longer slump in crypto markets may lie ahead.

That’s the view of strategists at JPMorgan Chase & Co., including Nikolaos Panigirtzoglou, who said such funding on Thursday is about $10 billion a year, less than a third of the rate seen in 2021.

“This is a worrying development as venture capital funds are reluctant to deploy capital in the digital asset space, increasing the likelihood that the current weakness in crypto markets would be long-lasting,” the team wrote in a note.

Venture capital investment in the industry hit a more than a year low at $4.4 billion in the third quarter. The crypto sector has withered under the tightening monetary policy, hurting liquidity and thus the demand for riskier assets.

The JPMorgan team said that weak crypto venture funding in September and October implying a decline in July and August was not purely seasonal as hoped.

An index of the best digital assets is down 56% this year. Bitcoin has stalled in a trading range of around $20,000 since it bottomed out in June. A rally in Chinese stocks that brightened investor sentiment helped the largest token rise about 2% to $20,645 as of 6:25 a.m. in London.

Ether ranked second and alternative coins such as Cardano and Solana also showed signs of life. But Dogecoin sank, partially ending a speculative rally driven by the view that supporter Elon Musk might somehow integrate the token into Twitter following the social media venture’s takeover.

The major crypto exchange Coinbase Global Inc. said Thursday it doesn’t expect the industry to recover quickly from a trade decline that hurt revenues. The company’s chief financial officer, Alesia Haas, said in an interview that “headwinds may continue or may increase.”

Global markets continue to be plagued by the prospect of a higher end point in the Federal Reserve’s rate hike cycle to fight inflation. Such background suggests that riskier investments like crypto will still face pitfalls in the coming weeks and months.

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