Blockchain Firms Raise Big Money Despite Crypto Bear Market
Institutional funds continue to pour into the crypto space as traditional and crypto companies look to build strength in the bear market.
While retail investors are dumping cryptocurrencies, institutional investors are piling into the space, seeing it as an opportunity to determine their digital asset strategy ahead of the next bull market. Two trends seem to be emerging: increasing crypto-focused venture capital investments and more traditional asset managers providing institutional clients with access to crypto assets.
Following New York Digital Currency Group’s $720 million fundraising, Brevan Howard Digital and Morgan Creek Digital recently led a $40 million funding round for blockchain gaming company Horizon Blockchain Games. Horizon, based in Toronto, will use the funds to build its game developer platform Sequence, Niftyswap, an NFT marketplace and a digital trading card game.
Brevan Howard Digital gives institutional investors access to crypto assets, while Morgan Creek Digital counts Solana, 1inch Network and Coinbase as part of its investment portfolio. Video game giants Ubisoft and Take-Two Interactive Software were also part of the fundraiser.
In late September 2022, NYDIG raised approximately $720 million for a bitcoin fund, according to an SEC filing. The company behind NFT collection Doodles raised $54 million from Reddit co-founder Alexis Ohanian’s VC firm Seven Seven Six and FTX Ventures in mid-September. 2022 to finance music and gaming activities.
Mining company Rhodium Enterprises recently announced that it plans to raise funds through a reverse merger with SilverSun Technologies, a company that buys and builds out technology and software companies. Following the merger, SilverSun shareholders will be awarded an approximately 3% ownership interest in Rhodium.
BlackRock backs crypto, a signal to TradFi firms
BlackRock, the world’s largest asset manager, recently announced plans to launch a spot bitcoin private trust. Private trusts rely on the price of an underlying asset and are listed on a public exchange. Investors can buy shares in the trust using a brokerage account, eliminating the need for them to hold bitcoin directly. The trust company takes money from institutional investors and buys bitcoin or another crypto asset, which it stores in a fund. This makes the institution the owner of the digital asset instead of the investors.
BlackRock’s recent partnership with Coinbase is designed to allow institutional investors to access products from Coinbase’s Prime offering using BlackRock’s Aladdin asset management software.
British company Abrdn recently bought a stake in Archax, a crypto exchange.
ETPs poised for a bull run despite outflows
Despite the decline in crypto prices, asset managers including Charles Schwab launched 40 cryptocurrency exchange-traded products in 2022. Crypto outflows from crypto exchange-traded products have slowed as most retail investors have fled the market. In Q3, investors withdrew roughly $18 million from crypto ETPs, compared to over $600 million.
But Kenneth Lamont of Morningstar told the Financial Times that these moves by asset managers may be proactive, and that ETPs are “launching in anticipation of the next crypto bull run.”
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