The cryptocurrency industry has faced a challenging year, marked by increased regulatory scrutiny, cautious investors, and a noticeable reduction in capital deployment compared to the heady days of 2021. This shifting landscape has placed significant hurdles in the path of many budding startups, making it increasingly difficult for them to secure the funding they need to thrive.

This capital scarcity has also cast a shadow over the Bitcoin ecosystem. Erik Svenson, the Co-founder and CFO of Blockstream, a prominent blockchain infrastructure firm, highlights the growing struggle Bitcoin-focused companies face in securing investments.

Speaking on TC’s Chain Reaction podcast, Svenson noted, “I believe crypto investments reached their peak early last year. However, Bitcoin itself has historically remained undercapitalized.”

Blockstream, founded in 2014, specializes in developing its own sidechain technology, known as the Liquid Network. In addition, the company engages in Bitcoin mining operations and offers hardware wallets for Bitcoin and various other assets. Notably, Blockstream has opted not to launch its own token, a path often taken by many other crypto firms during the ICO frenzy of 2017.

“We made a conscious decision early on not to issue our own token,” Svenson explained. “We didn’t pursue an ICO, unlike numerous projects of that era. Instead, we’ve relied on more traditional venture capital investments.”

Blockstream secured $125 million in funding in late January, bringing its total funding to approximately $400 million. As of August 2022, PitchBook data indicated a post-money valuation of $2.49 billion for the company.

Nevertheless, Blockstream hasn’t navigated these waters without turbulence, particularly in the midst of the broader funding challenges affecting the crypto market. Svenson acknowledged that while Blockstream boasts some “strongly bullish Bitcoin investors” among its backers, it also counts limited partners (LPs) in its investor base. The current volatility in the crypto market has added complexity to the equation. “LPs are grappling with both macroeconomic factors and the industry-specific shifts that have unfolded over the past year,” Svenson added.