In the cryptocurrency industry, the means to the ends have flipped.
Big banks and social media giants aren’t the only ones to take notice of Bitcoin after its price surge over the past few months. Venture capitalists are also keeping a close watch, and they’ve responded with a change in investing trends.
In 2018 and during the dreaded crypto-winter, the price of Bitcoin plummeted from over $13,000 to under $3,200 in less than 11 months. This fall that made VCs quiver in fear of the digital assets market, pushing them into the arms of cryptocurrency’s underlying technology, blockchain. Until now.
According to a report by Bloomberg, new data from CB insights has revealed that blockchain startups, the silver lining of 2018’s bear market, saw a significant outflow of cash.
The data suggests that VC investments in companies primed to be on the distributed ledger technology [DLT] amounted to $784 million from 227 deals in 2019. This amount is expected to cross the $1.6 billion mark by the end of the year. Over the entirety of 2018 however, the amount recorded by companies was a whopping $4.1 billion. This suggests that 2019 is presently recording an over 60 percent drop.
Internally, within the blockchain ecosystem, there lies a divergence as well. Corporations have recorded a decline in the money coming in. Startups that have spent a few years in the space are “drawing less support,” while emerging startups are “fairing better.” In 2019 alone, several former naysayers of the Bitcoin space have integrated DLT into their own operations.
Despite blockchain not hogging the headlines and being overshadowed by the volatility of the Bitcoin market, CB Insights stated that since 2014, the United States DLT industry has received the most funding from venture capitalists.
Between the period of 2014 and 1 July 2019, the US saw the highest investments for blockchain startups, amassing 40 percent of the global total. China stood second with 15 percent, while the United Kingdom, Singapore, and South Korea, took 8 percent, 4 percent, and 3 percent, respectively.
The hype around blockchain last year could be a result of the storm of hate the cryptocurrency industry was facing after the collective market cap dropped from over $800 billion to just over $100 billion. The technology that built the foundation for the market was the only survivor, with several complementing industries and governments including it to ease internal administration.
Since Bitcoin began rallying around the second quarter of 2019, several parties have shown a great deal of interest in the digital assets market. Wall Street, opportunistic as ever, jumped on the Bitcoin rally, with the XBT Futures volume soaring on the CME since April, while the custom digital asset trysts of Facebook and JP Morgan have been well documented.
However, this could also be a case of the hype around DLT correcting itself from the highs of last year. Senior Analyst at CB Insights, Nicholas Pappageorge, had this to say.
“It took a little bit for the enthusiasm to wear off.”