According to Barry Silbert, the founder and CEO of Digital Currency Group (DCG), many venture capital funding deals in the crypto sector have fallen apart in the past few months as a result of the 12-month bear market.

Silbert, who oversees the operations of one of the largest venture capital firms in crypto with investments in Coinbase, bitFlyer, Blockchain, Chainalysis, Coins, ErisX, Etherscan, Kraken, Ledger, Ripple, and many more large-scale companies in the cryptocurrency space, said:

“We’ve seen half a dozen fundraising deals fall apart over the past month after the lead pulled out. All is not well in crypto VC investor land Good time to remind founders that a signed term sheet does not equal cash in the bank.”

Difficult Period For Crypto Companies

The bear and bull market cycle works the same way for venture capital firms as retail or individual investors. As ShapeShift CEO Erik Voorhees explained, venture capital firms tend to move out of a market when it struggles and comes back when it’s flooding with investments, demand, media coverage, and user activity.

Some venture capital firms, like Andreessen Horowitz, have stayed true to their vision and continued to lead investments during a market downtrend. However, the majority of venture capital firms habitually headed to the exits once the industry started to dwindle.

“The VCs disappear when markets are down, and flood back in when markets are up. Are they not supposed to be the smart money? Their investing instincts seem little better than the Coors drinkin’ taxi driver all excited about Tron three weeks before the bubble pops,” Voorhees said.

In the past two to three months, some firms have made several high profile multi-million dollar investments in crypto startups that are strengthening the infrastructure around Bitcoin.

Nasdaq and Fidelity, for instance, engaged in a $27.5 million funding round to finance ErisX, a cryptocurrency exchange and a strictly regulated futures market based in the U.S.

At the time, ErisX CEO Thomas Chippas said that the support from leading financial institutions is monumental for the long-term growth of the startup:

“With increasing financial support from leading edge firms, ErisX stands to provide the most robust, secure and regulated digital asset offering available to both institutional and individual participants. Closing this second round of funding enables us to continue building our modern platform and expand our team.”

Build it While its Down

In the upcoming months, the crypto sector could continue to see a handful of venture capital firms and financial institutions finance the strengthening of the infrastructure surrounding the asset class while the vast majority of venture capital firms hold out on any additional investment.