Can VCs pull crypto out of this downturn?

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Last week, we saw Musk latch on to Doge. This week, we're talking about where all that crypto-VC money might go.

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A weekly dispatch from the office of crypto editor TechCrunch Lucas Matney:

The reality is that the dreams of Web3 investors and founders are a little stuck: a crypto downturn generally means less hype, less chatting with friends, and generally less organic consumer integration into consumer experiences. consumption. It's far from ideal for VCs who have seen a web-based consumer dream within reach, but thankfully they have deep pockets thanks to recently raised mega funds with crypto betting as their sole focus. p>

Still, these are tough times for the mainstream crypto audience, with acolytes recently minted and many of them likely discouraged from spending more time, money or effort on new ones. Web3 projects. The question is how do you put that venture capital money to work in a down cycle; many will take the period of reduced attention to pour into infrastructure and “pickaxes and shovels” tool sets. Others could become insular, supporting consumer projects that are even more disconnected from the larger world of crypto, but expose users to synthetic economies, wallets and digital goods, an arena particularly well served by infused games. of crypto.

Gaming appears to be a big beachhead for crypto consumers and I expect many of these dedicated crypto funds to pour a significant amount of their funds into studios and platforms pursuing this. There are many significant challenges, including generally negative user sentiment and gaining platform buy-in, given that NFTs are still treated with a high degree of hostility by app stores and gaming platforms.

Self-contained worlds of game titles with dedicated tokens disconnected from the most self-referential corners of crypto can be the easiest place to find new eyeballs. And as customer acquisition costs rise across the board, VCs may be more willing to directly subsidize customers as part of user acquisition, returning to the days of the gig economy. where VCs bribed new users to sign up.

It has been a strange bull cycle for crypto games. While a lot of money has been poured into game-to-win titles and SNES-grade DeFi-infused pixel games, it's fair to say there was nothing really good. Most games are over-indexed on profit and clear ponzinomics that push growth to the most extreme extremes without worrying about stability. Creating great games takes time, and fun games create a level of user concern that is difficult to optimize when trying to maximize short-term profits on both sides of the transaction.

We thought winter was already here for crypto, but US regulators have made it much colder. First, the US Department of Justice arrested three people, including a former Coinbase employee, for alleged insider trading on the exchange. Then the Securities and Exchange Commission accused them of securities fraud, arguing that several of the coins they traded were, in fact, securities — a designation that comes with a whole host of rules that Coinbase and other exchanges did not necessarily follow. We've shared our unofficial thoughts on how the laws might be interpreted and what it might mean for major crypto exchanges (more on that in my "This Week in...