LONDON (Bywire News) - If you’re looking for signs of a sector’s health it’s always a good idea to have a look at venture capital. When it’s busy, people are confident, when it dries up, not so much. So the crypto sector can take heart that despite a bleak crypto winter, venture capitalists are still pouring money into blockchain start-ups with 2022 looking set to break 2021’s record.
According to data from Pitchbook, VCs bet a total of $17.5 billion on blockchain start-ups in the first half of the year. At this pace, investment is well on course to top the $26.9bn raised last year – a time when the price of digital assets was hitting record levels.
Roderik Van Der Graf, founder of Hong Kong investment firm Lemniscap which focuses on crypto and blockchain claimed “The current market conditions – I don't think they faze investors,” whilst adding “the capital available is massive.”
VCs tend to contribute capital to young companies that they believe have the potential to grow. Data suggests that faith in the future of crypto and blockchain hasn’t wilted away despite the rough six months the industry has endured.
Hit with macroeconomic headwinds and the collapse of multi-billion-dollar ecosystems, Bitcoin has dropped around 65% from its November record of $69,000 with the overall market cap of crypto falling to $1 trillion.
Many companies have struggled with the fall in price as major exchange Coinbase and NFT marketplace Opensea both infamously lay off hundreds of staff.
Not all investors are bullish during a crypto winter.
David Siemer, CEO of California-based Crypto management firm Wave Fincnaicl, said there were indications from the inflated valuations of crypto firms in 2021.
"This will get a lot worse – we're a couple of months into this cycle. In the last cycle, the pain for those looking for funding was about 12 months."
North America, the hotspot for VC deals, has been the main hub of activity with $11.4 billion in the first six months to June, compared to $15.6 billion for the whole of last year.
The numbers contrast heavily with general VC activity in the US where deals fell to $144.2 billion in the first half from $158.2 billion in the same period last year as macro worries slowed down investment.
Rumi Morales, director of investments at Digital Currency Group, claimed that the data reflects robust faith in crypto and blockchain as a whole.
“There used to be existential risk being in the space – that the whole industry was just going to go away, it was all a dream. That is not the case anymore.”
Crypto adoption as an investment tool grew last year with a focus on the possibilities blockchain can unlock growing however industries like finance and commodities remain elusive.
Among the major crypto deals in the US were $400 million raised by a venture arm of FTX in January; a $450 million fundraising round by ConsesnSys in March; and $400 million raised by Circle only a month later.
Activity in Europe also suggests strength with $2.2 billion of VC investment coming in the first half of the year.
Libson-based Fedi, which is an app designed to help people receive, hold and spend their bitcoin claimed they raised $4.2 million in seed round investment.
“Within seven days we had all of the investment commitments,” Obi Nwosu, one of its founders, told. “And within less than a month and a half, we had the initial fundraise target in the bank. Done.”
(Writing by Samba Jallow, editing by Klaudia Fior and Tom Cropper)