The price of bitcoin has recovered pretty well from lows hit late last year. But investor enthusiasm for all things crypto and blockchain remains far below peaks scaled several quarters ago.
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So far in 2019, the pace of private funding for blockchain and crypto deals lags sharply behind last year. The downward trajectory applies to both initial coin offerings and venture rounds for companies in the space.
Altogether, investors have put an estimated $3.38 billion to work in initial coin offerings and private funding rounds for companies in 2019, according to Crunchbase data.* At this pace, annual investment portends to be a fraction of the 2018 investment total of $12.86 billion.
The declines come as major cryptocurrencies continue to trade well below prior peaks, although they have rebounded from last year’s lows. And new cryptocurrencies have failed to deliver breakout hits. Out of the roughly $250 billion in total valuation for the crypto space, roughly 70 percent comes from bitcoin alone.
Below, we break out numbers for both investor-backed rounds and ICOs, looking at trendlines for investment totals and round counts.
Not A Popped Balloon, But Certainly A Deflated One
The current crypto and blockchain funding environment looks less like a popped bubble than a deflated one. Currencies are still trading and startups are getting funded. There’s just less money chasing the space.
In the chart below, we look at total funding across both initial coin offerings and private funding rounds for crypto and blockchain-focused companies globally:
Cryptocurrencies hit their bubbliest highs around late 2017 and early 2018. That’s when bitcoin passed the $20,000 mark, and total crypto market cap peaked at around $700 billion. Venture funding of blockchain-related startups was also on a roll around then, buoyed by bullish memes about the technology’s game-changing potential.
This past December, by contrast, looks like the lowest point for the crypto space in the past couple years, with total market cap down to about $75 billion. Crypto bears, some of whom predicted an eventual bitcoin valuation of zero, were starting to look rather prescient.
Now here we are in early September, and neither the bull nor the extreme bear case appear to be winning out.
VCs Still Like Blockchain, But They Like It Less
In short, blockchain is still a thing. It’s just not the thing that everyone’s talking about.
That includes venture capitalists, many of whom have been outspoken boosters of all things blockchain. As a group, they’ve been putting less money into the space of late.
So far this year, investors have put about $2 billion into rounds for companies tied to crypto and blockchain technology, not including ICOs. That’s on pace to come in well below the $4.65 billion tally for all of 2018. We have more numbers in the chart below:
Some of the most prominent VCs active in the blockchain and crypto space have been cutting back in 2019. For instance, Andreessen Horowitz participated in 14 funding rounds with an aggregate value of nearly $850 million in 2018, per Crunchbase data. So far this year, the firm has backed five deals valued at a little over $75 million.
They’re not alone. Digital Currency Group and Blockchain Capital, two of the most active investors, have also cut back sharply in deal count and aggregate value of rounds they’ve backed.
It also should be noted that the numbers include companies for which crypto or blockchain is a component but not a core focus of the business. For example, the largest crypto-related round for 2019 is a $323 million Series E for Robinhood, which offers cryptocurrencies but is best-known as a commission free stock trading app.
But there have been other big rounds this year for companies more exclusively focused on crypto.That includes a $200 million Series A for Bithumb, a South Korean crypto exchange platform, and $100 million in Series C funding for Kraken, the San Francisco-based crypto trading provider.
Little Punditry For Blockchain And Crypto Slowdown
So, the data speaks pretty clearly: Blockchain and crypto-related funding is down but by no means dead after the cryptocurrency bubble popped. What’s lacking, however, is much in the way of punditry regarding why things are playing out this way.
The blockchain and crypto camps, as aforementioned, are mostly populated with extreme bulls and extreme bears. There are those who think bitcoin is the younger generation’s version of gold. And there are those who consider crypto the mother of all scams and blockchain the most over-hyped technology ever.
One possibility, laid out by Andreessen Horowitz, is that blockchain will present disappointments in its long march to widespread viability. The firm writes:
“Blockchain computers are new types of computers where the unique capability is trust between users, developers, and the platform itself… In exchange for these new capabilities, blockchain computers trade off other capabilities such as transaction scalability. This can lead people to dismiss them, in the same way people dismissed early smartphones because they traded off computing power and screen size for portability and new sensors.”
Personally, I’m not buying the firm’s comparison here. No one really dissed the future of smartphones, even back in the flip phone era. We just weren’t sure exactly when all the pieces – price, portability, durability, computing power, etc. – would come together in a package that warranted mass adoption.
Blockchain, by contrast, has some pretty hardcore doubters. And cryptocurrency, in particular, has some real pessimists among the world’s wealthiest, including Warren Buffet, who compares bitcoin to rat poison squared.
That said, we’re still in early innings. And for now, it looks like neither the blockchain boosters nor the detractors have sealed a winning case.
Crunchbase’s ICO data is not exhaustive but does capture broad trendlines for growth and contraction in ICO funding.
Illustration: Li-Anne Dias.
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