Breaking All Records: VC Funds Injected USD 30B In Crypto This Year
Venture capital (VC) funds invested some USD 30bn into crypto this year, exceeding almost fourfold the amount recorded in the previous record year of 2018, and injecting more funds into the industry than in all the previous years combined, according to data from financial data and software company PitchBook.
The funds’ crypto-related investments included a USD 1bn funding round by crypto derivatives exchange FTX last July, Custodian New York Digital Investment Group’s USD 1bn funding round in mid-December, a USD 725m fundraising round by blockchain integration tool specialist Forte last November, and a USD 350m funding round by non-fungible token (NFT) platform Dapper Labs last March.
“We’ve moved beyond just digital gold. We’ve got financial services, art, gaming as a subcategory of NFTs, Web 3.0, decentralized social media, play-to-earn — all of that made investors think 'we don’t have enough exposure,'” Spencer Bogart, general partner at San Francisco-based Blockchain Capital, told Bloomberg.
The sudden surge by what many VC managers previously considered as niche sectors, such as NFTs, showed investors what they might be missing out on, according to Bogart.
“Investors are funding anything and everything,” said Rob Le, an analyst at PitchBook.
The latest developments suggest that the crypto investment frenzy is likely to continue and possibly further accelerate in 2022.
Last month, crypto VC firm Paradigm has announced the launch of what is considered to be the largest crypto-oriented venture fund ever, with a total of USD 2.5bn earmarked for investments in the sector.
"Our conviction in these beliefs has only strengthened over the past three years," and via the new fund, Paradigm will continue investing "in the next generation of crypto companies and protocols," alongside the existing flagship fund "across all stages and geographies," the company sad.
“This new fund and its size are reflective of crypto being the most exciting frontier in technology,” said Paradigm.
Meanwhile, in a separate report obtained by Cryptonews.com, Robert Le said that the latest regulatory developments in the US, along with others such as the European Union’s Markets in Crypto-Assets (MiCA) legislation, are likely to benefit the market for crypto custodians and increase institutional adoption.
The US Securities and Exchange Commission (SEC)’s “custody rules require investment advisors with over USD 150m in [assets under managment] to maintain client assets with a 'qualified custodian.' Before 2020, the SEC had not designated any bank, broker-dealer, or trust as a 'qualified custodian' of digital assets. This largely prevented traditional investment advisors, wealth managers, and other entities with fiduciary obligations from acquiring digital assets such as Bitcoin for clients,” Le said.
“However, in 2020, state financial regulators including those in New York, Wyoming, and South Dakota began issuing “qualified custodian” designations to digital asset providers, an action typically only done at the federal level. The SEC allowed the measure at the end of the year and in Q3 2021, the [Office of the Comptroller of the Currency] allowed digital asset custody at federally chartered banks,” he added.
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(Updated on December 21 at 08:34 UTC with additional quotes from Robert Lee.)