As of December 1, venture capital has invested over $ 27 billion in cryptocurrency and blockchain startups, and that's before institutional blocker NYDIG announced that it had raised a $ 1 unicorn round. billion on Tuesday (Dec 14) and Crypto Bank Anchorage said Wednesday it raised $ 350 million.
That gave them valuations of $ 7 billion and $ 3 billion, respectively.
The FTX exchange that has been sticking its name in sports stadiums across the country is seeking $ 1.5 billion, for a valuation of $ 32 billion.
Venture capital is investing in crypto at record rates, and it's not hard to figure out why. The cryptocurrency industry burst into the mainstream in 2021. About 13% to 16% of Americans own or have used crypto, according to the best studies.
But where is it going and where should it go?
Finance vs decentralized finance
Major banks like JPMorgan Chase, whose CEO Jamie Dimon was a noisy crypto skeptic, are offering wealthy clients cryptocurrency investment options, and mutual and hedge funds like Blackrock are joining in.
More than half of the 100 largest banks have invested in funding rounds for crypto and blockchain companies and companies. Citigroup announced in November that it was hiring 100 new digital asset employees. Standard Chartered, Citigroup, Goldman Sachs, JPMorgan Chase and BNP Paribas have each invested more than $ 250 million in the industry.
See: Crypto finds growing acceptance in cross-border remittances
The same goes for payments. After a flirtation with Ripple, Wells Fargo recently partnered with Stellar on remittances and began resolving currency transactions with HSBC on a blockchain platform. Earlier this year, PayPal revealed that it was building a new encryption unit, and in October, payments company Stripe announced that it was also creating an encryption team. And shortly after leaving the helm of Twitter, Square CEO Jack Dorsey changed the name of his payments company, one of the earliest crypto entrants, to Block, emphasizing his crypto approach.
And Facebook (now Meta) finally dived into payments, adding Paxos stablecoin payments to its 2 billion customer WhatsApp messaging service; you know, the same thing that his project Libra (now Diem) tried that got the financial powers of the world. a terrified rampage.
Showing them the money
Valuations increased substantially in cryptocurrencies as well, with an average rise from around $ 12 million in 2020 to $ 35 million so far in 2021.
Rating the industry funding record in 2021 as "extraordinary" at a year-end resume, Pitchbook editor-in-chief Alexander Davis said that "the cryptocurrency scene gave new meaning to investor exuberance."
Read also: Six Crypto Executives Warn Congress Not To Over-Regulate Cryptocurrencies
Crypto VC fundraising is also booming, with 89 mega-funds, with at least $ 500 million in capital, raising nearly $ 100 billion.
And venture capitalists aren't just investing in crypto at a record pace. The broader FinTech industry that includes crypto saw nearly a quarter of a trillion dollars - $ 244 billion to be precise - in exits in the first three quarters of 2021. On December 15, Pitchbook described it as cramming โthe value of a decade of departures in nine months. "
What to buy
So where should that money go?
Non-fungible tokens (NFTs) are setting the world on fire and the sector is still in its infancy. There are also open fields that DeFi-based companies are looking at, like gaming, personal identity credentials, and, if Meta CEO Mark Zuckerberg is right, the metaverse.
Then there's the infrastructure and services, which will require everything from new decentralized finance or DeFi protocols to businesses with any shipping needs.
On the banking side, it's pretty clear that custody and crypto payments, particularly behind-the-scenes interbank deals, are important areas. But the same applies to customer-centric platforms. After years of battling crypto payments, banks have come to realize that they are behind the curve in an industry segment that could join tech giants in attracting many of their retail customers to services that have grown from payments at the point of sale. include small-scale loans and investments.
See: Visa's global crypto advisory practice to help banks shape their crypto roadmaps
Not to mention the fact that Anchorage, which just raised $ 350 million, as you may recall, is now a federally licensed bank. And many more crypto companies want that license. Then there are Mastercard and Visa, which need to protect their payments business and therefore need companies that can provide support in this field. Mastercard's October purchase of leading blockchain intelligence firm CipherTrace is one example.
Consulting and trading services have launched into cryptocurrencies in a big way, from the big four accounting firms like Deloitte and PwC to IBM, Mastercard and Visa, with many others offering consulting services.
But more broadly, investors must continue to focus on the ways blockchain technology is moving and transforming everything involved in supply chains. The TradeLens shipping platform that tracks cargo around the world has been an early success, attracting the majority of the world's shipments to the platform, along with a growing number of port operators. Created by Maersk and IBM it has been an early example of what blockchain can achieve. But everything from farm produce to gemstones has been increasing in use over the years.
