Crypto start-ups raised huge venture funding rounds in January

on Feb2
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A bitcoin sculpture made from scrap metal is installed outside the BitCluster cryptocurrency mining farm in Norilsk, Russia, on Sunday, Dec. 20, 2020.

Andrey Rudakov | Bloomberg | Getty Images

Cryptocurrency start-ups are having a solid start to the year, bagging hundreds of millions of dollars in fresh cash even as investors grow wary about a steep drop in digital asset prices.

Several privately-held firms announced bumper cash injections in January. Crypto exchange FTX and its U.S. affiliate raised a combined $800 million, valuing the companies at $32 billion and $8 billion respectively.

Fireblocks, a crypto infrastructure start-up, was valued at $8 billion in a $550 million round, while rival Blockdaemon scored $155 million on a $1.3 billion valuation. It’s worth noting some negotiations for these deals likely began late last year.

It follows a blockbuster year for both cryptocurrencies and the ventures being developed to support the growth of the industry. Crypto and blockchain start-ups raised a record $25 billion in 2021, marking an eightfold increase year-on-year, according to CB Insights data, as venture capitalists sought to ride a rally in bitcoin and other tokens.

Made with Flourish

Still, the future direction of the market has become more uncertain after a sharp sell-off. Bitcoin fell as low as $33,000 in January, down from an all-time peak of nearly $69,000 in November. The world’s largest cryptocurrency ended the month down over 18%, marking its worst start to a year since the beginning of a bear market in 2018.

Crypto winter?

The pullback in crypto prices has got some investors worried about a more severe downturn known as “crypto winter.” The last such event happened in late 2017 and early 2018, when bitcoin lost as much as 80% since its then-record high.

“If we are entering ‘crypto winter,’ it’s unlike the bear markets we’ve seen before,” said Konstantin Richter, CEO and founder of Blockdaemon. “The crypto market today has institutional adoption. They see the promise crypto holds. Many institutions are long-term bullish on the tech.”

Digital assets have slumped lately due to expectations of higher interest rates from the Federal Reserve and other major central banks. A common investment case for bitcoin is that it can act as a store of value that’s uncorrelated with other financial assets — it’s sometimes referred to as “digital gold.”

But there are concerns this thesis is unravelling, as central banks look to tighten policy in an effort to tame rising inflation. Along with cryptocurrencies, global stock markets have also taken a tumble, with high-growth tech stocks in particular taking a battering as traders reassess their positioning.

The crypto market “has been volatile from the very beginning,” said Michael Shaulov, CEO and co-founder of Fireblocks. “What is very clear to us is that the investment in the infrastructure is not going to stop.”

Shaulov says that, whether or not the market is teetering on the edge of another crypto winter, capital will continue flowing into the sector as focus moves beyond “speculative” trading to more sophisticated use cases. These include rapid settlement of payments via stablecoins and putting financial securities on the blockchain.

Web3

John Linden, CEO and co-founder of crypto gaming start-up Mythical Games, says a crypto bear market might not be the worst thing to happen right now.

“We could head towards a crypto winter — and I think, honestly with any market, that’s not a terrible thing,” he said.

Pricing mismatch



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