Andreessen Horowitz faces billions in crypto losses after 2021 boom fades

Andreessen Horowitz, known as a16z, has faced sharp losses in its crypto investments after a strong run in 2021. The venture capital firm returned over $4 billion to investors following Coinbase's IPO in April 2021. But by mid-2022, falling crypto markets had wiped out billions in value from its holdings.

The firm's early crypto fund, launched in 2018, lost 40% of its value in the first half of 2022. A larger blow came when a16z's remaining stake in Coinbase shrank by $2.9 billion as the exchange's stock dropped over 80%. Coinbase also reported a 20% decline in monthly active users during Q2 2022, leading to workforce cuts of more than 20%.

OpenSea, another major a16z investment, had seen its valuation soar 100 times in 2021. Yet by mid-2022, its monthly trading volumes collapsed by nearly 100% between May and August. The company also reduced its staff by over 20%.

Despite the downturn, a16z has continued expanding its crypto portfolio. Since 2021, it has backed over 30 additional blockchain companies, including DeFi platforms like Aave and Uniswap, scaling solutions such as Optimism and Arbitrum, and NFT/gaming infrastructure like Immutable X. In May 2022, the firm announced its fourth crypto fund, totaling $4.5 billion—$1.5 billion for seed investments and $3 billion for later-stage deals.

Investment activity, however, has slowed. The firm made only nine deals in Q3 2022, down from 21 in Q4 2021. Still, a16z remains committed to the sector, even as demand for crypto products remains weak.

The firm's third crypto fund, launched in 2021, had delivered a 10.6x return after fees—its best-performing fund ever. But recent losses highlight the volatility of crypto markets. With billions still allocated to new projects, a16z is pressing ahead despite the ongoing downturn.