Everywhere you look prices seem to be falling. The cryptocurrency market cap has fallen well under $2trillion. Stock prices are plummeting. The War in Ukraine rages on. COVID is still rearing its ugly head. The Fed has just raised interest rates. These are all very real situations occurring at the macro-level. With all of this happening at once, it may seem to be a pretty dark time across all of the markets. For the hardened investor, situations like these (as always) can present good buying opportunities. Big money considers this to be the case.
Macro Level
For us normal folks, when prices start falling it can be easy for everything to be gloom and doom. It’s hard watching your holdings decrease in value and the longer this occurs the more challenging it becomes. Despite these conditions, the overall maturation of the cryptocurrency ecosystem, including external investments is absolutely flourishing! This gives credence to the belief that, especially in cryptocurrency, things will change sooner or later.
One of the best indicators as to the true “health” (not price) of the market is the flow of external money into or out of the cryptocurrency ecosystem. When money is flowing inwards it’s a definite signal that other markets (traditional finance, entrepreneurs, etc.) are using their resources to acquire assets or fund projects within the space. In 2021 (through November) the global venture capital investments with in the market skyrocketed to over $27billion, with many new projects being backed to develop key technologies. In the first three months of 2022 (in the middle of the market dropping, too), we’re continuing to see cash pour into the cryptocurrency markets at an increasing rate. If the sky really were falling, why would the super rich and wealthy continue to invest?
For the retail investor (most of us) this is an obvious trail of breadcrumbs to follow. One of the many tenets we continue to refer to across the site is to always follow big money. Major market movers like Bain Capital, Sequoia Capital and Haun Ventures, all staples in the traditional finance markets, are continuing to inject large amounts of capital into the ecosystem. While the dollar value of the VC investments is staggering, the number of individual investments made is a better indicator. Over 500 individual major investments were made during Q1 2022. This may seem to be “many small bets” – but a key indicator is that $5.8billion of these new investments was actually for expansion rounds (or re-funding projects that have delivered on their initial promises) [CoinTelegraph Research].
There are few guarantees, if any, within the crypto space. One thing is certain that the market in its entirety will be very different 5 years from now. The major players in venture capital and the traditional finance space are investing at unprecedented rates, establishing developer funds (Dragonfly Capital recently launched a $650million fund to support small and medium sized projects). With all of this money flowing it, the long term outlook continues to be overwhelmingly bullish. The important things to consider in these markets are the long term viability of the projects you like. If big money likes it and you like it, odds are over the long run you’ll make out just fine.
