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 gets — 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 crypto and blockchain industries,” Steven Alexopoulos, an analyst at JP Morgan, wrote in a note last month.
As of July 14, annual venture capital investment in the crypto and blockchain industry was $17.9 billion, according to the bank.
That’s a very high number compared to both other years and a depression in broader crypto markets. That exceeds 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 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, which is behind popular crypto wallet MetaMask, raised $450 million at a valuation of $7.1 billion.
From Barron’s
