FTX Ventures’ Amy Wu on Startup Valuations and Rate Hikes; Stellar Foundation Backs Early Stage Startups

Amy Wu, Head of FTX Ventures. Photo by FTX Ventures. Art by Akash Pasricha.

The Federal Reserve is expected to raise the federal funds target rate this week by a quarter percentage point, from 0%-0.25%, and major banks have forecast it will steadily raise rates to as high as 2% this year. One way of valuing companies, using discounted cash flows, suggests these rising rates should compress private valuations even among crypto startups, because they make startups’ cost of capital more expensive.

I set out to test that hypothesis with investors in blockchain startups, a sector that benefited from a $32 billion firehose of VC funding just last year, according to PitchBook. The short answer: rates aren't yet squeezing crypto startup valuations. But the drop in public stocks like Coinbase, which is down 64% from its peak, is likely to.