Private Funding For Crypto Hits Peak As Public Markets Sour

For crypto startups and unicorns, 2021 was an exceptionally good year. But for public companies tied to the crypto space, 2022 has been off to a bad start.

On Friday, the price of Bitcoin was hovering around $37,000, down around 45 percent from its November high. The S&P Cryptocurrency Broad Digital Market Index was down a similar amount. And the bulk of shares from a sample of public companies in the crypto space, most previously venture-backed, all were down over 50 percent from peaks hit in the past year.1

Some of the standouts include:

• Coinbase, the popular platform for cryptocurrency transactions, is down over 50 percent from its peak.
• Robinhood, the zero-fee stock and crypto trading provider, has fallen more than 80 percent from its peak.
• Bakkt, a digital asset platform, is down over 90 percent from its highs earlier this year.
• Safello Group, a Swedish crypto wallet provider, is down over 80 percent from its peak.

Meanwhile, in the private markets the frenzy around funding for crypto- and blockchain-focused companies continues.

Venture funding in the crypto space hit more than $21 billion in 2021, far surpassing the $3.7 billion invested in 2020, according to Crunchbase numbers. That level of funding also helped mint more than 30 new unicorns last year in the industry.

So far, 2022 is off to a brisk start for crypto and blockchain funding as well. Funding for the first 26 days of January totaled over $2.7 billion, per Crunchbase data.

The biggest rounds came this week, as digital asset security provider Fireblocks raised $550 million and cryptocurrency exchange FTX raised $400 million at an $8 billion valuation. Other big 2022 rounds include OpenSea, an NFT marketplace that pulled in $300 million, and iTrustCapital, a service for investing in crypto through IRA accounts, which raised $125 million at a valuation over $1.3 billion.

Pondering the public/private disparity

So, private markets are running hot, even as public markets have been cooling off some for crypto.

What to make of it? Crypto is a notoriously volatile space, so recent history would caution against reading too much into a single period of sharp price declines. Just a year ago, for instance, the price of Bitcoin was lower than it is now. The historical pattern has been one of frequent, sharp pullbacks followed by new record highs.

Still, for now the crypto pullback could mean companies in the space eyeing public offerings will hit the pause button. Several in the industry—including Ripple, Kraken, BlockFi and FTX—have been bandied about as potential 2022 IPO candidates.

The space has already seen one planned IPO falter. Last week, Bitcoin miner Rhodium Enterprises postponed its planned $100 million public offering amid souring market conditions.

And it’s not just crypto. After a blockbuster year for the IPO market, the outlook for the first quarter of this year seems quiet. It hasn’t helped that companies that went public last year have seen weak performance overall. Only about a quarter of last year’s IPOs are trading above issue price, per Renaissance Capital.

Illustration: Li-Anne Dias

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