Venture investors in the cryptocurrency industry have struggled in recent years.
Funding declined after highly publicized events resembling Sam Bankman-Fried‘S FTX failure and collapse of several other lenders. The general deterioration of the situation on the enterprise capital market nor did it help the still maturing market.
In fact, enterprise capital funding for cryptocurrency startups dropped to only $3.6 billion in 821 deals last 12 months – a 78% decline from $16.2 billion in 1,544 deals accomplished in 2022. in line with Crunchbase data.
But the much-criticized sector is currently making headlines for a very different reason. Bitcoin, the largest cryptocurrency by market capitalization, is hitting new all-time highs as investors once again seem like warming to the digital currency.
This week, Bitcoin rose above the $72,000 level – a dramatic increase considering it was below $16,000 at the end of 2022. Over the last 30 days, the cryptocurrency has increased by roughly 44%, or almost $22,000. Bitcoin’s rise in value actually began in the second half of last 12 months, with the value of the digital asset increasing by roughly 179% over the past six months.
While the price increase has been too recent to essentially impact enterprise investing, funding for cryptocurrency startups has seen a slight uptick. So far in the first quarter, enterprise capital dollars have already surpassed $625 million in 111 deals for cryptocurrency startups with almost three weeks left in the quarter, Crunchbase data shows. Last quarter, in 108 transactions, that result was just $446.3 million.
Some of the largest rounds in the cryptocurrency sector have included:
- Great app from Hong Kong Free calls raised $80 million in Series A funding.
- An organization providing crypto-financial services based in Paris Flowdesk closed a $50 million Series B round.
- Based in Zurich We suckregulated digital assets company, raised a enterprise round price roughly $40.6 million.
What is behind the price increase?
It’s unlikely that a sharp rise in Bitcoin prices will have such a quick impact on enterprise capital funding in this sector, but some of the forces influencing price increases may indicate that the sector is growing.
Perhaps the biggest boost to Bitcoin got here from an unlikely source: KNOT.
In January, the committee and its chairman Gary Gensler – who has never been a fan of cryptocurrencies – has given little support to U.S. exchange-traded funds that hold Bitcoin from nearly a dozen asset managers, including giants resembling Black Rock AND faithfulness.
The acceptance proved groundbreaking for the previously legacy sector. Thanks to ETFs, investors can now trade digital currencies without having to own them and without having to trade them on cryptocurrency exchanges, which generally charge significant transaction fees.
Investors have flocked to ETFs for their ability to make cryptocurrencies more accessible. This is estimated the nine largest leading bitcoin ETFs received a combined $10 billion in seven weeks.
The UK took a similar move this week Authority for financial matters it also gave the green light to the country’s exchanges to trade exchange-traded bonds backed by crypto assets – possibly sparking greater interest in cryptocurrencies from overseas.
Bitcoin halving effect
While these moves likely excited investors who were hesitant about cryptocurrencies, Bitcoin was also helped by an event expected next month.
Bitcoin halving occurs roughly every 4 years or for every 210,000 verified blocks. Miners are rewarded with Bitcoin for these validations, but the reward is halved when a halving occurs. This, in fact, signifies that fewer Bitcoins will enter circulation – which will likely increase demand by reducing the amount entering the system.
The event, which has happened three times so far, is generating headlines and excitement in the industry while regulating the supply of Bitcoin – all of which is prone to force the price of the asset higher.
Consequences of project financing
Given what appears to be a sustained tailwind pushing Bitcoin prices higher, it stays to be seen what impact this might have on enterprise investing in the space.
“I don’t think there will be a big increase in investment this year, but 2025 may be bigger,” he said Yash Patelgeneral partner w Telstra ventures which invests in Web3 and fintech start-ups.
Patel said that as the price of Bitcoin increases as a result of ETFs and the halving event, the sector attracts extra money. He added that many people in the crypto, blockchain and Web3 space began and developed new technologies and projects at the same time as investors pulled out.
“Even during the previous economic downturn, we never really saw a decline in blockchain development,” Patel said. “Even as some projects fell into disrepair, developers continued to work in these spaces. Many learned to earn money to survive.”
This may encourage some investors to return.
“I would expect VCs to come back to investing in this space,” he said. “Crypto and blockchain are like cockroaches – they never disappear.”