- Investors have continued to fund promising crypto startups, even as markets reportedly move into a crypto winter.
- These actions point to long-term bullishness, even as data indicates a rising correlation between digital assets and stocks.
Crypto start-ups continue to see huge cash inflows despite overall price bearishness since November last year. Several of them reported bountiful investments in January.
For instance, crypto exchange FTX and its US affiliate raised a collective $800 million, raising their valuations to $32 billion and $8 billion, respectively. Crypto infrastructure company Fireblocks is now valued at $8 billion following a $550 million funding round. Its rival Blockdaemon bagged $155 million, valuing it at $1.3 billion. Negotiations for these funding deals likely began late last year.
Crypto dips but funding intensifies
Overall, crypto and blockchain startups raised a record $25 billion in all of 2021, according to data from CB Insights. This represents an eightfold growth from the previous year’s $3.1 billion. It also depicts increased interest in the crypto space by venture capitalists, especially since digital assets had a blockbuster in 2021.
Nonetheless, a sharp sell-off in recent days has increased wariness in the market. Crypto king Bitcoin (BTC) plummeted as low as $33,000 in January after a $69,000 all-time high in November. BTC also closed the month down over 18 percent – the worst start to a year since 2018. These events have drawn up the crypto winter narrative among analysts and investors. The last time such an event happened was between late 2017 to early 2018, when Bitcoin dumped by as much as 80 percent from its then-record high.
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Blockdaemon’s CEO, Konstantin Richter, says that if indeed the market is entering a cryptocurrency winter, then it will be unprecedented. However, he points out the hope institutions hold in the long-term prospects of digital assets saying,
Many institutions are long-term bullish on the tech.
The move from speculative to real-world use cases
The crypto dip has been attributed, in part, to expectations of higher interest rates from the Fed and other major central banks. Such policies are part of these organizations’ efforts in curbing pandemic-induced inflation. Bitcoin, famously touted as “digital gold,” has been viewed by many as an inflationary hedge. However, this thesis has become even more disputable seeing the increased correlation between cryptocurrency and global stocks – the latter, and in particular, high-growth tech stocks, have taken a battering of late. For instance, the Nasdaq Composite is down roughly 12 percent since hitting all-time highs in November.
But even then, Michael Shaulov, CEO and co-founder of Fireblocks, is convinced that “investment in the infrastructure is not going to stop.” He reasons that the cryptocurrency sector is moving away from a “speculative” focus, to more sophisticated use cases.
John Linden, CEO and co-founder of the $1.3B cryptocurrency gaming start-up Mythical Games, said a crypto winter would not be such a “terrible thing.” He adds that it has happened previously and it helped flush out projects that had no real value. Linden also thinks that the slump in crypto markets could encourage innovation around Web 3.0.
Related: Despite the crypto ban, China is aggressively pushing blockchain use across 164 cities
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