The bear market is taking its toll on VCs as well. The first crypto fund that was launched by venture capital firm Andreessen Horowitz, also known as a16z, has lost 40% of its value in the first half of the year, the Wall Street Journal reported.

Some unnamed sources pointed out that investors are having concerns about whether the firm has gone too far with its crypto investments. 

As of now, the VC firm has four crypto funds. The last one was launched in May this year, raising as much as $4.5 billion. For context, at that time, BTC was trading at around $30,000.

a16z has not restricted itself to just crypto tokens and blockchain startups. According to the WSJ, the firm has also lost billions of dollars on its stake in crypto exchange Coinbase (COIN) and software development firm Microstrategy (MSTR), which holds a fair amount of BTC.

Even though the crypto markets rallied in the past 48 hours, most of the tokens are far away from their all-time highs. The total market capitalization of the crypto market topped at $3 trillion in November 2021, and is now hovering around $1 trillion, according to data from CoinGecko. BTC and ETH are down 69% and 68% from their record highs respectively.

However, it looks like Chris Dixon, founder of a16z’s crypto arm, is not worried about the falling prices. “What I look at is not prices. I look at the entrepreneur and developer activity,” he told the WSJ.

Venture capital investments in crypto have decreased significantly during the last quarter, according to data from Cointelegraph Research. During the third quarter of 2022, VC investments netted $4.98 billion, down from almost $15 billion in the previous quarter. However, data also shows that the downward trend might be reversing, as the numbers are already up from previous months.

Many believe that the involvement of VCs in crypto is bad for the industry, as they tend to centralize control, while others argue that they are necessary because they bring the capital to build new projects. Jason Choi, founder of Tangent XYZ, highlighted two main issues: “1) Single funds take up most of the round for seed stage projects, killing decentralization on day 1. 2) VCs convince founders to pump up pre-product valuations to fill larger checks.”