Despite the recent slight correction in the cryptocurrency market, there is no denying the fact that the cryptocurrency industry has faced a lot of volatility over the past few months, which is evident from the overall market capitalization of the sector which is $$ 2.5 trillion has fallen. $1.18 trillion in a 45-day period earlier this year.
However, despite all these ups and downs, 2021 continues to see an increasing amount of capital in this fast-growing sector. For example, reports indicate that in the first half of the year alone, venture capital (VC) funds invested $17 billion in various crypto-related startups and companies.
To put things in perspective, the above figure is the highest ever seen in any single year and is equal to the total amount raised in all the previous years combined. Johnny Lew, CEO of cryptocurrency exchange KuCoin, told Cointelegraph: “Early-stage investors in cryptocurrency have already achieved profitability and have a keen understanding of market development rules. This is the main reason why they are exposed to market volatility. Still ready to invest.
Liu further said that for traditional investors, the crypto industry allows them to achieve higher returns in a shorter cycle, citing the volatility of Bitcoin (BTC) as an example of the same. “When the market is experiencing volatility, it is the best time to invest, and investors will benefit from it.”
A Closer Look at the Numbers
A large portion of the above $17 billion figure comes from a single deal that saw a new cryptocurrency exchange called Bullish, following the initial injection of $100 million, 164,000 BTC and 20 million EOS tokens by Block Had $10 billion in cash and digital assets. . Block.one led the capital raising with Peter Thiel, Alan Howard, Galaxy Digital and other investors.
In fact, this one deal alone would have been enough to make 2021 the biggest year for venture capital investment in the crypto space, but if that wasn’t enough, the remaining $7.2 billion would equate to 2021, with 2018’s record $7.4 billion. . , which is even more impressive considering that there are still five months left before the end of the year.
On the subject, Ignus Terenas, head of communications for cryptocurrency exchange Bybit, told Cointelegraph that these numbers are not exactly shocking as VCs are known for their voracious appetite for risk: “VCs take advantage of relatively abundant and alternative resources. have been – that is, Capita – to harness something that is so rare and unique, that is the partners and talent with which they can build long-term value.”
More Notable VC Activities
A month ago, Silicon Valley-based venture capital firm Andreessen Horowitz announced the launch of its $2.2 billion crypto fund, with a spokesperson claiming that the company was “fundamentally optimistic” about the space despite price volatility. ” Was. “We believe that the next wave of computing innovation will be driven by crypto,” partners Katie Hahn and Chris Dixon were quoted as saying.
In addition, it should be pointed out that Andreessen’s first crypto-focused fund went live almost three years ago, at a time when the market was at its historical low, thereby reflecting the firm’s long-term confidence in regards to this as-yet-emerging industry. be performed.
Similarly, Fireblocks, an infrastructure provider for digital assets, revealed that it had managed to raise $310 million in a Series D round of funding, thus valuing the company at $2 billion in less than six months. has been reached. The fundraiser was led by institutional giants including Sequoia Capital, Stripes and the venture arm of Thailand’s oldest bank, Siam Commercial Bank.
Solana, a project that seeks to provide a high level of scalability and transaction speed, recently announced that it has completed a $314.15 million private token sale, raising the nine-figure total in the history of the crypto industry. Has become the fourth largest fundraising event. Some of the company’s investors include Polychain Capital, Alameda Research and Blockchange Ventures.
Cryptocurrency exchange FTX also recently closed a $900 million funding round that saw a total of 60 participants including SoftBank, Sequoia Capital, Coinbase Ventures, Multicoin, VanEck and the Paul Tudor Jones family. As a result, the trading platform’s valuation rose to $18 billion from $1.2 billion a year ago, making it one of the largest cryptocurrency companies in the world.
Finally, Dapper Labs, the team behind CryptoKitties and NBA Top Shot, this March secured nearly $305 million in new funding from several former and current NBA stars, including Michael Jordan, Kevin Durant and Alex Caruso, and other investors. Chernin Group and Will Smith’s venture capital conglomerate Dreamers VC. After closing this latest funding round, Dapper Labs now reportedly has a valuation of $2.6 billion.
Is more institutional money coming?
To understand whether more capital will continue to enter the crypto space, Cointelegraph contacted Antoine Trenchev, managing partner of digital asset service provider Nexo. In his view, there is a lot of untapped potential in the crypto-finance sector, especially with digital currencies, allowing for an unprecedented level of inclusion for under-banking. she added:
“The deals we are seeing right now – like Fireblocks snapping $310M, SoftBank investing $200M in Brazilian crypto exchange Mercado Bitcoin – after months of boardroom discussions by billion-dollar money managers and long-term strategic decisions. are being made as a result, rather than a momentary decision.”
Not only that, fintech firms currently have an unprecedented opportunity to build on their existing customer bases by offering modern products and services that users and companies really need, especially those that act as a hedge against inflation. can operate in – the fears of which are rising on massive horizons all over the world.
Simon Kim, CEO of Hashed, an early-stage venture fund, believes that VCs are just starting to understand the intrinsic value of crypto projects as it was difficult to justify the price of tokens created by most blockchain projects in previous years. :
“Ethereum is facilitating millions of transactions through multiple DeFi services, Metaverse games, and NFT services built on top of the network. There are now over 20 million monthly active user accounts using Ethereum. The intrinsic value of the DeFi token is Ethereum. Or even more obvious than bitcoin.”
He further highlighted that like IT industry leaders like Amazon and Google amid the dot-com bubble, many crypto projects today have a solid foundation with a suitable business model and data. “This is why VCs are now pouring their money into crypto projects. They now believe that the next Google, Amazon and Facebook can be found in the space”, Kim said.
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On a more technical note, Lew highlighted that the increasing VC investment can, in large part, be attributed to the increasing number of users who have joined various centralized exchanges (CEXs) and decentralized exchanges (DEXs) in recent months. flooded in, adding: “Some popular DEXs such as Uniswap and PancakeSwap have exceeded the traffic numbers related to some of the major CEXs.”
what is next?
Despite the COVID-19 pandemic, which has put the global economy at a standstill over the past year and a half, reports suggest that global venture capital funds have broken all previous records in the first half of 2021, the figure now stands. is $288 billion. This is more than $100 billion compared to the previous six-month cycle record that was set during the second half of last year.
Jehan Chu, managing partner at Keenetic, a venture capital firm that invests in blockchain companies, told Cointelegraph that the ongoing capital crunch around the world is forcing investors to take more and more risk in their search for alpha, and that Despite ongoing institutional uncertainty in the future of crypto, they have no choice but to invest in the space:
“Fortunately, as blockchain technology and crypto have graduated from the Carnival Freakshow into an inevitable future, confidence in the underlying companies is at an all-time high. Additionally, a generation of cheap money coming from American printing press investors has come to the fore.” Never has there been so much capital and traditional gates have been destroyed by partisan politics and poor financial management.”
Arul Murugan, founding managing partner, Borderless Capital, believes that as more applications go live, there will be a need to build more and more infrastructure and as more infrastructure is built, it will attract even more applications. will create a virtuous cycle that began this year.
Not only that, he believes that the gap between traditional finance and decentralized finance (DeFi) is closing as more and more people move towards the crypto spectrum. Murugan added: “Right now, crypto is less than 1% of traditional finance and people are seeing huge growth opportunities.”
Therefore, as an increasingly digitized future draws closer, the use of crypto technology will continue to grow, so it stands to reason that more players from the traditional finance sector will continue to make their way into this growing market, helping it to grow. Ahead.