See: Web3: VC Still Investing in Crypto, Outlier Ventures Boss Says | The crypto mile

Record levels of venture capital continue to pour into cryptocurrencies, the head of one of the world’s leading web3 accelerators has claimed.

In this week’s episode of The Crypto Mile, Jamie Burke, CEO of Outlier Ventures, took a look at the general state of cryptocurrency and web3 and forecasted how the sector will perform in 2023.

Burke suggested that VCs still see potential in the cryptocurrency and web3 industry despite the derision directed at the space since the collapse of the Sam Bankman-Fried FTX exchange.

‘Not a crypto winter yet’

Many analysts claim that a prolonged crypto winter has set in and that this extended bear market, where crypto prices drop, projects start to fail, and trading volumes drop, will last for at least a year.

However, Burke disagreed, saying, “I still hold the line that it’s not a crypto winter yet, like in a tech winter, referencing what’s happened over a couple of decades with AI.”

Check: live cryptocurrency prices

He added: “A true crypto winter is when all capital dries up, and this is not the case in web3. We still have billions of dollars in venture capital allocated to this space, yet to be implemented. We have new funds coming together this space instead of seeing a slowdown.

“So while listed assets in the crypto market proper are down between 17% and 90%, in venture firms we are seeing record levels of capital deployed.”

Great technological talents migrate to the web3 space

Across Silicon Valley, tech companies are cutting their workforce in a bid to cut costs in anticipation of a global economic downturn.

Facebook owner Meta (META) announced earlier this month that it would lay off 11,000 of its workers, or 13% of its staff.

In contrast to this, Burke said, talent is now migrating from web2 incumbents and knocking on the doors of web3 projects, or starting their own companies.

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He said: “We’re seeing a lot of talent coming into the web3 space, a lot of people leaving web2, because big tech is imploding with a lot of layoffs.

“Web2 people are re-evaluating their lives and want to incorporate the web3 paradigm.”

Burke hopes that the healthy signs he is detecting from startups, venture capitalists and web2 talent flocking to the web3 space will ultimately bolster current crypto assets.

centralized exchanges

The Outlier Ventures founder added that while cryptocurrencies have shown resilience over the years, what happens next matters, especially with the way centralized exchanges are run.

He stressed the need for centralized exchanges to actively use blockchain, the fundamental technology behind the industry.

He said: “We have to accept centralized exchanges, but not in their current form. Centralized exchanges must embrace the technology that they are giving people access to.”

One way to do this is to connect reserve wallets to a publicly distributed ledger, such as a blockchain, allowing for real-time monitoring of exchange activity.

Blockchain Benefits

The collapse of the FTX exchange may have dealt a heavy blow to the reputation of cryptocurrencies, but it also highlighted the benefits of blockchain transparency.

Burke argued that investigators would not have been able to perform financial forensics on FTX transactions so quickly had it not been for the transparency of the publicly distributed ledger technology.

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The same financial forensics that took just days to unravel after the FTX implosion would have taken years in the opaque world of traditional finance.

Burke said: “Look at the speed of forensics after what happened at FTX, compare it to Enron and how long it took to uncover equivalent frauds in traditional finance,” referring to the 2001 Enron scandal when the US corporation falsified its financial information. statements to hide billions of dollars in debt from failed deals and projects.

He added: “It can take years to rebuild and get a picture after these collapses in traditional finance, if we ever get a picture.

“But if centralized exchanges get involved in any way with blockchains, we can find relationships between wallets and the follow flow.”

Reserve assets test

Burke also advocates for centralized cryptocurrency exchanges to disclose their balance sheets and reserves.

Binance, the largest cryptocurrency exchange, recently allowed auditing firm Mazars to explore its bitcoin (BTC-USD) reserves.

The report found no variation between Binance’s own account of its digital asset reserves and the audit. Binance launched a trial reserve website two weeks ago.

More dominoes could fall after FTX implosion

Burke still sees a place for centralized exchanges, even though his reputation took a hit after the FTX crash.

However, he does not believe they should be domiciled in offshore financial havens in the same way that FTX is in the Bahamas.

He suggested that they should be located in key markets like the US and still be used to move fiat currencies like the dollar into the crypto ecosystem.

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Burke warned that there could still be more collateral damage as a result of the FTX exchange crash.

He suggested that some big players in the crypto space are vulnerable and “if something were to happen to them, that poses a systemic risk to the entire industry.”

High volatility expected in crypto

However, Burke added: “The crypto space has seen these cycles before and is used to this level of volatility.”

The roller coaster trajectory of the cryptocurrency market can be traced by following the price of bitcoin, the most valuable digital asset in the ecosystem.

The MT Gox hack in April 2013 caused bitcoin prices to plummet from nearly $260 to $50.

In 2017, bitcoin peaked at nearly $20,000 only to crash with the early 2018 crash, in an event known as the Great Crypto Crash.

Read more: UK finalizes plan to regulate cryptocurrencies

But the adoption rate and interest from retail investors increased from 2018 to a peak in November 2021, when Bitcoin hit $68,000.

However, several crypto bubbles have burst throughout 2022, including the crash of Terra UST (LUNA20314-USD), a multitude of bankruptcies, and now, most recently, the collapse of FTX.

Crypto is a tightly intertwined economy and when one large entity hits the rocks, it brings others with it.

Now the industry is on a ledge and its fate seems to hang in the balance.

Watch: Get Your Money From Exchanges’ Warns Bitboy Crypto After FTX Scandal | The crypto mile