J.P. Morgan analysts issued a new research report on Thursday, warning that the inflow of venture capital funds into the cryptocurrency industry this year has been relatively flat compared to previous years, posing potential downside risks to the market.
(Background: J.P. Morgan: Decreased Lido Staking Ratio “Saved Ethereum”! Recognized as Security by SEC May Reduce)
Led by Nikolaos Panigirtzoglou, J.P. Morgan analysts stated in their research report released on Thursday that although the cryptocurrency market has recently experienced a recovery, the inflow of venture capital funds into the cryptocurrency industry this year has been relatively lukewarm, posing downside risks to the cryptocurrency market.
Venture capital funds are slowly recovering
Data from The Block Pro shows that the cryptocurrency industry has attracted $3.2 billion in venture capital funds this year, compared to over $4 billion during the same period last year.
J.P. Morgan analysts pointed out that venture capital financing in the cryptocurrency field has shown signs of recovery this year, but still lags behind previous years. However, they also added that with the rebound of the market this year, more and more venture capital firms are raising or have raised new funds. Earlier this month, 1kx raised $75 million to establish a new fund to support early-stage cryptocurrency startups.
Paradigm is also reportedly raising $750 million to $850 million for a new fund, while Galaxy Digital, Hack VC, and Hivemind Capital are raising $100 million, $100 million, and $50 million, respectively, for their new funds.
Further reading: Paradigm reportedly raising £850 million, launching “largest” cryptocurrency venture capital fund in 2 years
Cryptocurrency incubator Alliance completed the initial fundraising for its third fund in February, raising $10 million from Brevan Howard Digital and Galaxy Digital, and plans to raise an additional $80 million before July.
Various signs indicate that venture capital funds seem to be slowly recovering. In addition, J.P. Morgan also pointed out that cryptocurrency hedge funds have been more active this year, with their managed assets increasing significantly in the past 6 months, estimated to be around $20 billion.
Ethereum spot ETF will eventually be approved
Furthermore, J.P. Morgan analysts reiterated in their report on Thursday that the probability of the U.S. Securities and Exchange Commission (SEC) approving an Ethereum spot ETF in May is not expected to exceed 50%:
However, overall, analysts believe that the SEC will eventually approve such ETFs.
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The discount of the Grayscale Ethereum Trust (ETHE) has widened. Image source: The Block
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