The bitcoin rally has seen the cryptocurrency climb to unprecedented highs and this has not just been reflected in the markets. Away from the OTC exchanges and desks that set the price of BTC, the interest of private and institutional investors is growing at a rapid pace. Evidence of this can be seen in the growth of crypto venture capital funds, which has raised billions of dollars in 2020.
On December 23rd, Hashed, a Seoul blockchain investment group, revealed that it had raised $ 120 million for its first crypto fund. The company, led by CEO Simon Kim, plans to invest in disruptive blockchain startups including similar base-layer protocols to Ethereum. According to Kim, the next wave of crypto networks will mark the beginning of the “protocol economy,” an era where data and value are transmitted globally by crypto networks using a shared public ledger. He anticipates strong government and institutional support for this new paradigm and has had no trouble selling the group’s first VC fund.
Blockchain Cycle Investor Startup
Accredited investors are limited in the amount of crypto assets they can trade, including BTC and ETH primarily through regulated brokers and custodians. Blockchain funds provide an alternative means of exposure to digital assets and the ecosystem they support. As bitcoin has broken new records, surging past $ 22,000, some investors are looking beyond the 12-year-old cryptocurrency to kick off the next wave of blockchain networks.
Data from research group The Block shows that $ 900 million was ever recorded in blockchain startups in Q3 in 2020. Investors rushed to start decentralized bootstrap finance projects specifically, including those focused on portfolio management, lending and derivatives .
Private Investor Fund Public Networks
No one knows where Bitcoin creator Satoshi Nakamoto originated, with speculation setting it up everywhere from London to LA. What can be said is that the movement he started, based on blockchain technology, has become a borderless industry that is attracting major investment worldwide. In the United States, Andreessen Horowitz a16z subsidiary was founded to search for promising crypto startups, alongside companies like Pantera Capital and Galaxy Digital, led by veteran investor Mike Novogratz.
In Asia, meanwhile, Hashed is not alone securing private investment to fund public blockchain networks. Many cryptocurrency exchanges, including Binance and BitMax, have their own VC arms, tasked with nurturing next-generation crypto companies. The symbiotic relationship often results in the same exchanges listing the native sign of the projects they have incubated once they reach maturity.
It’s not just VCs that have tried to come into contact with blockchain either. Family offices and hedge funds have also taken an interest in the space. Harvard University’s investment arm is one endowment fund that has already jumped into the crypto market, joining two other investors in an $ 11.5 million investment in crypto company Blockstack. Yale University is also known to have made a significant investment in cryptocurrency.
The Institutional Case for Crypto
Bitcoin is going through the early stages of a new asset class, from suffering early bubbles to attracting scammers with their rich-fast schemes. The buoyancy of the market has been tempered by robust products that cater to a professional audience. Crypto is significantly more mature now than in 2017 when BTC went to the highs in which it now trades. Today, the industry supports a healthy futures market, while better options and hold have all anchored bitcoin while making it delicious for institutional investors.
Elon Musk’s connection to bitcoin, which has largely included crypto memes tweeting to its 41 million followers, suggests a deeper interest in the digital currency. In a typical Musk-ian exchange on December 20, Michael Saylor of MicroStrategy urged Tesla’s CEO to follow his lead and convert some of Tesla’s cash funds into BTC.
“Are such large transactions even possible?” pondered Musk, to which Saylor replied bitcoin bull in the affirmative, before offering to show Musk how.
Bitcoin’s low correlation with traditional assets has forced some investors to rebalance portfolios that were heavy on bonds and equities, allocating a share to BTC. However, smarter investors look beyond bitcoin to the possibilities afforded by new blockchain protocols, where the risk reward is higher, but so is the potential for external earnings.
Crypto Bug Holding Corporations
While institutional investors have been buying bitcoin, and investing in the industry that has formed around it, companies have been piloting their own blockchain solutions. Hashed has publicly supported Kakao, which is responsible for developing the country’s Klatyn blockchain, and LINE blockchain, which is owned by Tokyo’s LVC Corporation. Meanwhile, Big Four accounting firm KPMG has expanded its blockchain strategy, supporting Microsoft, Tomia, and R3 to develop a solution for a 5G network, and file its own blockchain patents.
Against this backdrop of corporate innovation and private investment in blockchain, VCs have seen crypto funds fill up quickly. This digital gold rush has stimulated a booming business in collection sessions and shovels – the tools and apps for interacting with the next wave of decentralized protocols.