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Bitcoin price crash hasn’t stopped venture capital from piling into crypto.
Courtesy photography
Bitcoin
may have just hit its worst quarter in more than 10 years, but venture capital doesn’t care – and private money is piling into crypto at a historically breakneck pace.
The Bitcoin bull run of 2020-2021 saw prices rise from $10,000 in September 2020 to nearly $69,000 by November 2021, starting a new round of private money buying up both tokens and stakes in crypto companies.
While Bitcoin’s all-time high nine months ago was as good as it got for the biggest digital asset — prices have since crashed as low as $18,000 in recent weeks amid concerns of another “crypto winter” — the same cannot be said for venture capital sentiment.
“While many of the ‘traditional’ sectors, including software and pharma and biotech, continued to represent the majority of VC investment activity in 2022, one of the most interesting trends we’ve observed in recent quarters has been the record pace of VC investment in startups in the crypto and blockchain industry,” Steven Alexopoulos, analyst at
JP Morgan
,
wrote in a note on Monday.
As of July 14, annual venture capital investment in the crypto and blockchain industry was $17.9 billion, according to the investment bank.
That’s a very high number compared to both other years and a depression in broader crypto markets. It surpasses most previous full-year totals and represents more than 60% of the $29.4 billion in VCs poured into crypto in 2021.
While the $7.9 billion that global VCs invested in crypto startups in the second quarter was down from $9.8 billion in the first quarter, it still represents more than the investments of all of 2020, when crypto startups saw $6.5 billion flow in, according to JP Morgan.
“Consequently, the flow of capital to private startups should, in our view, persist across many segments, including … crypto/blockchain,” Alexopoulos said.
Big-money VCs who remain bullish on crypto and blockchain startups — backing it with billions of dollars — support the theory that a crypto winter or Bitcoin bear market could give the industry a chance to refocus and build more successful projects.
JP Morgan’s analysis of where VCs have focused their money on crypto and blockchain startups shows the biggest deals in the second quarter spread across different firms.
The biggest deal of the quarter, according to the bank, was trading platform Trade Republic’s $1.2 billion increase to a $5.3 billion valuation. Software firm ConsenSys, behind popular crypto wallet MetaMask, raised $450 million at a valuation of $7.1 billion, while USDC stablecoin issuer Circle raised $400 million and blockchain network Near Protocol raised $350 million.
Deals have been spread widely, with crypto exchanges and lenders from Binance.US to FalconX raising money alongside blockchain data and analytics company Kaiko and non-fungible token infrastructure group NFTPort.
Write to Jack Denton at [email protected]
