The cryptocurrency market is cooling, but institutional investments into the space have been heating up and have generated over a billion dollars worth of funding in under half a year.
Market Slowing But Investments Speeding Up?
You would think that with the slowdown in the cryptocurrency market would come a correlated slowdown in institutional investments. However, investments in the space from venture capital firms have only gained momentum since last year’s bull run.
Cryptocurrencies and blockchain technology seem to be buzzwords for venture capitalists as this industry has grabbed the attention of many venture capital firms over the past year.
TechCrunch has reported that venture capital investments made in the space have already surpassed the levels seen in the entirety of 2017, clocking in at casual $1.3 billion not even 5 months into the year. If investment keeps up at this rate, institutional firms’ investments will amount to over $2.8 billion by the end of the year.
2018 is already breaking records for VC blockchain and crypto funding https://t.co/WTjTutTnlR
— finder.com.au (@findercomau) May 21, 2018
It is important to note that the abovementioned amount excludes ICOs, bringing a further sense of scale to the amount of capital that has been invested in the cryptocurrency space.
The majority of the staggering $1.3 billion figure has been attributed to a few major developments in certain startups over the past few months, most notably Xpring, Circle, and the Basis Stablecoin.
Ripple-owned Xpring hopes to help startups achieve their business goals through funding, advice, and other resources in exchange for the implementation of XRP and the XRP Ledger. This program will help Ripple reach a higher level of market adoption and will allow XRP – both the coin and ledger – to be used in a broader range of applications.
Goldman-Sachs backed Circle just announced that they will be creating a USD-pegged crypto similar to Tether. Circle intends for the proposed stablecoin be more regulated and transparent in comparison to the current stablecoin leader, Tether.
This announcement came quickly after Circle generated another $110 million in funding, with a majority of this funding coming from ASIC giant, Bitmain. After the investment round was completed, Circle has self-reported its company value at almost $3 billion.
Another startup, Basis, raised over $133 million in April from venture capital firms like Google Ventures, Andreessen Horowitz, and SkyCaptial for the creation of an alternative stablecoin. Details about their plans for a stablecoin are few and far between, but seeing as how they have received a substantial amount of support from VC firms, it is clear that they have some promising plans for consumers in the future.
In addition, Coinbase’s foray into the venture capital industry has been another move which has signaled an uptick in institutional investment. Coinbase recently joined venture capital giant VC Andreessen Horowitz in making an investment into a cryptocurrency startup called Compound. The company hopes that the move will allow their users to borrow and lend cryptocurrencies to gain a profit.
It has become apparent that this is just the start for Coinbase Ventures, as a recent self-valuation done by the Coinbase parent company pegged its value at over $8 billion, allowing for a potentially large fund allocation to be attributed to the venture subsidiary.
The money isn’t just in startups. It is also in the ICO industry. In the first fiscal quarter of 2018, ICOs received $6.6 billion in funding – a more than 50% increase in comparison to Q4 2017. However, much of this ICO investment has been attributed to the more common retail investor, as institutions may find it difficult to legally invest in token offerings.
Build It And They Will Come
Many startups and ICOs are still very much in their infancy and have yet to release any products that will draw more consumers into the space. Until that time, it is unlikely that these startups will have much of an effect on the price levels seen in the cryptocurrency market at this time.
Naysayers continue to maintain that “cryptocurrencies are dead,” but the truth is that we are just seeing the tip of the iceberg. This rapidly growing industry is far from dead or declining, it is just experiencing a few growing pains along the way. With due time, many of these projects will begin to release working products and services that will help facilitate the wide-scale adoption of cryptocurrencies and related technologies.
Like many market leaders like to say about the space, “build it and they will come.”