Over the past year, the crypto industry has grown stronger and matured. A Bitcoin futures ETF was launched in the US, and publicly traded companies have increased their cryptocurrency reserves. The dynamics of venture capital investment is a significant indicator of industry growth. The volume and structure of the investment says a lot about the interest of market participants in the industry and the future development prospects of individual segments.
In 2021, the volume of venture capital investments in crypto and blockchain startups exceeded $33 billion, according to Galaxy Digital Research
. This is more than the sum invested in all previous years. Compared to 2020, the volume of venture capital funding has increased by 700%. The crypto and blockchain sector accounted for 4.7% of global venture capital investment last year.
The main incentives that got investors involved were the growth of listings and the maturation of the market. Cryptocurrency companies got bigger and gained more weight – 141% more than the rest of the venture capital sector in the fourth quarter of 2021. Some large crypto companies went public. In the past year, at least 40 crypto companies have achieved the status of "unicorn".
The industry’s explosive growth could not help but affect the size and number of venture capital funds focused on the crypto and blockchain industry. Last year, 49 funds of this type were created with average assets under management of about $300 million. According to Galaxy Digital Research, the number of venture capital firms reached 500 in 2021.
The share of late-round deals has also increased. In 2021, significant funds were invested in projects in their later stages. This indicates a maturing industry and a growing number of companies generating a steady revenue stream.
Cryptocurrency-friendly companies such as Robinhood and PayPal have increased their interest in the industry. Despite regulatory scrutiny of cryptocurrency lending services, investors have been eager to fund the segment.
According to the results of 428 deals, DeFi (Decentralized Finance) projects attracted a total of $1.9 billion.
The volume of the investment says a lot about the market’s interest in crypto and blockchain
The explosive growth of the crypto industry has triggered the interest of venture capital funds
Venture capital investment is fuel for the development of the crypto market
(Non-fungible token) and GameFi ('Play to Earn' games with access to crypto and DeFi) received about $5 billion in investment across 406 transactions last year. In the second quarter, inflows more than doubled from the previous period.
Investors are increasingly interested in Web3, products from which are related to digital identity, data management, content monetization, information storage, and so on. The share of projects from NFT, DAO (Decentralized Autonomous Organization), GameFi, and Metavillages in the annual volume of venture capital investments was 17% ($5.61 billion). In 2021, significant investments were also made in projects developing decentralized social networks, data storage solutions, and decentralized telecommunications.
The share of investment in crypto and blockchain
startups is relatively small compared to AI, machine learning, and traditional fintech, but is gradually growing.
Venture capital investment is a kind of fuel for the development of projects and the market as a whole. The blockchain ecosystem has expanded considerably, and projects have gone far beyond trading and mining to offer a wide range of products and services. Given the trends of recent months, Web3, DAO, Metauniverses, and other trends will strongly drive the industry’s growth in the near future.
MediaArticlesHow venture investments flows reveal the maturation of the blockchain industry