As the downturn hits crypto, a key source of startup investment could slow down

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While 2021 venture cycle was still flourishes, every sector of startups was hot. Each geography sets records. Founders reigned supreme, venture capitalists lined up to pay high prices for startup stocks, and new business models flourished.

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Now, in the middle of 2022, we are seeing an invigorating reversion to the mean. Most startup sectors seem to be more busy digesting last year’s excesses than attacking the future, while geographic start-up investment trends have shifted. What’s more, the pendulum of relative strength has swung back toward venture capitalists from the founders, startup prices are falling, and some of the ideas that ruled the roost in 2021 are in disarray.

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It’s worth noting that none of this should come as a surprise; the business cycle is always turning.

But things didn’t turn around right away. In hindsight, it seems that the feedback loop between falling prices in the open market and a decline in startup activity first appeared in the software market. The attack on SaaS companies in the public markets has led to a decrease in the rate of investment and the cost of software startups, which is still not assimilated by start-up technology companies of all levels of maturity.

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Cryptocurrency lasted longer than its period of joy. Of course, in the first quarter, the value of Coinbase shares declined somewhat, but by the end of March, the value of the US cryptocurrency exchange was still over $40 billion. Coinbase continued to lose ground as its shares began their current decline in April, but back in May, this column wrote that “no one told the crypto world that startup mega deals weren’t so plentiful anymore“.

The pain of the current recession slower implementation in the crypto market, perhaps because the blockchain domain is something of a parallel economy to the one we interact with every day. Of course, they are directly related, but perhaps not as closely as, say, traditional startups and the Nasdaq.

Be that as it may, the period when crypto companies could avoid recession by simply working on their own vision of the future is over.

Growth, layoffs, mergers and acquisitions

Several weeks ago, Coinbase announced that he was putting hiring on hold to rethink his priorities. That alone was a shock, as the company was busy increasing its investment in technology back in the first quarter of the year. As the company said in first quarter income statement regarding its cost structure:

Technology and development expenditures of $571 million, up 24% quarter-on-quarter, were driven by technical hires as a result of our continued investment in product innovation and platform infrastructure.

What’s more, the company has set a level tone by saying it plans to keep costs within reasonable limits:

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