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ALGORAND (ALGO/USD)

Real-time Crypto  -  06:44:50 2023-02-03 pm EST
0.2708 USD   +6.11%
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Capital continues pouring into the crypto industry despite the crash

07/21/2022 | 03:27am EST

As crypto finds its way into more and more aspects of our lives, an increasing number of investors see its potential ľ and the investments follow, even in the midst of market crash.

If in 2020 crypto ventures raised only $5.5 billion, in 2021 this amount soared to $31 billion, according to Bloomberg. Seeing Bitcoin at $69k could have contributed to this enthusiasm, but the recent data shows that there’s much more to investor interest than the bull run. VC investments and acquisitions in the first half of 2022 did not decrease alongside Bitcoin price – quite the contrary.

According to Cointelegraph and Keychain Ventures recent report, so far in 2022 crypto companies have raised over $29 billion, almost reaching the total amount of 2021, and we are only half-way through the year.

What crypto projects attracted most funding?

Most crypto investments can be put into one of the 5 main categories: DeFi (decentralized finance), CeFi (centralized finance working with crypto products), NFTs (platforms with NFT-focused value proposition), web3 (platforms integrating crypto tools to decentralize different aspects of their operations) and infrastructure (blockchains and all the related activities).

Since the beginning of the year web3 as an investment category is clearly leading the way: it accounted for 42% of VC investment in Q2, up from 26% in the previous quarter. 
Crypto gaming company Animoca Brands has heavily contributed to this increase: its VC arm has closed 43 individual deals in the last quarter, choosing primarily web3. However, even less specialized investors, like Andreessen Horowitz or Coinbase Ventures, had a clearly pronounced web3 penchant.

DeFi sector attracted 16% of VC funding, while CeFi and infrastructure projects each received 14%, and NFTs accounted for 13%.

VC funding rounds

Venture Capital firms specializing in crypto have continued to actively raise funds.

One of the most active players in this domain is Andreessen Horowitz: after raising $2.2 billion in Q1 it doubled down on crypto in Q2, raising an additional $4.5 billion. The firm, which started its crypto adventure during the 2018 bear market, now believes that we are entering “the golden era of web3”, and with its four crypto funds amounting to $7.6 billion, it does put its money where its mouth is.

Sequoia has been quite active too: a $500 million token fund in Q1 was followed by a $850 million Southeast Asia fund and a $2 billion India fund in Q2.

FTX Venture still holds the third place among the biggest venture funds of 2022 with its $2 billion fund that has already invested in 11 deals, mostly in infrastructure and web3.

Web2 and web3 continue merging

Mergers and acquisitions have always been an efficient way to move forward, and it is particularly true for the crypto industry and traditional services.

In the beginning of the year Coinbase bought FairX, a CFTC-regulated derivatives exchange, which will allow it to offer crypto derivatives in the US.

In the second quarter Algorand Inc, the company behind the eponymous blockchain, teamed up with Hivemind Capital Partners, a crypto-focused investment firm, to acquire Napster. The companies believe that this P2P music streaming platform, which lived a meteoric rise and fall at the turn of the millenium, will help reinvent the streaming business in a web3 vein.

Acquisitions can be initiated by web2 companies as well. In the end of June eBay bought KnownOrigin, an NFT marketplace. The e-commerce giant is betting on the NFTs as part of its on-going tech-led makeover. 

Did market crash affect investments?

Even if the total amount of investments was almost identical in the first and second quarters of 2022 ($14.66 and $14.67 billion respectively), they have not been evenly spread. 
46% of Q2 investments occurred in April, with May and June – two months during which the total crypto market cap was cut in half – witnessing decreasing amounts. Also, while the total number of deals rose from 518 to 621, the average deal size shrank from $32.1 million to $26.8 million.

This indicates that investors have been treading more carefully, approaching new deals with the macro uncertainty and crypto market vulnerabilities in mind.

However, crypto stays a very promising industry. So far in July Lightspeed Ventures, a tech and crypto-oriented VC, raised over $7 billion and created a special team dedicated to blockchain infrastructure, a South Korean fintech giant Dunamu announced its plans to invest $385 million in web3, and a famous crypto VC Multicoin raised $430 million for its third fund.

They say crisis is the time to build.

Writing by D.Center


ę MarketScreener.com 2022
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