Venture Capital Increases Investments in Blockchain as Cryptos Continue to Lose Value

Venture Capital

By Bill Taylor/ Contributor

This is crazy, totally upside down and the opposite of what “normally” happens. What is it you ask? Well, after a spectacular 2017 when bitcoin went to $20,000 and every other crypto exploded up with it, in the first part of this year they all ‘crashed’. Bitcoin off over 70% from the high and others even more. BUT, unlike what you would expect, Fortune has recently reported that investment money into the sector (including blockchain) is INCREASING. Now historically when markets (stocks, bonds, etc.) go down, or crash, raising capital is virtually impossible. IPO’s are cancelled (market conditions), projects are shelved and investment bankers have to revert to a nice white wine rather than champagne. Not so for cryptocurrency or blockchain-related startups.

Venture capital, which usually goes into high risk early stage startups, is not fazed by the decline of nearly 50% in cryptocurrency values. Back in 2017, global venture investors ponied up slightly less than $1 billion in the sector, BUT in just the first half of 2018 investors have already plowed $1.4 billion into new startups. Why? Because the long term view of the sector is incredibly bright. Institutional money (lots of it) is waiting for regulatory guidance and a properly regulated crypto exchange. Oh, by the way, news on that progress changes almost daily and even hourly. While there are many skeptics (that’s being kind) with big names racing around yelling things like “bubble”, “fraud”, “fad”, etc., the smart money sees vast opportunity. The starting gun for this marathon just signaled the start of the race.

Some of the increased investment from venture firms may have come at the expense of the ICO (initial coin offering) market shrinking due to increased scrutiny by regulators, notably the U.S SEC (they’re excited ’cause they just learned to spell ICO). But, lest you think ICOs are over, consider that so far this year over $9.2 billion have flowed to ICO projects. In all of 2017, “only” around $4 billion went into ICOs. Ironically, with the SEC huffing and puffing, most ICO (and soon STO-security token offering) investors are outside the U.S. In places like Gibraltar, Singapore, etc., there ARE fully compliant regulated exchanges. The crypto/blockchain world is alive and well and getting bigger and investors know it.

Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews