Blockchain intelligence platform Blockdata reported that crypto companies received a record $6.586 billion funding in Q3 2021.
The amount is nearly twice the total funding received in 2020.
VC firms remain unfazed by China ban and U.S regulation scare.
NEW DELHI (CoinChapter.com) — The current year has been bumpy for the crypto industry. From Bitcoin reaching a new record high to an explosive market crash that happened right after, and from China’s hard-handed crypto ban to El Salvador making Bitcoin legal tender—2021 saw it all.
However, it seems that interest in cryptocurrencies is not waning. The third quarter of 2021 (July to Sept) saw venture funding for the crypto industry hit a record high of $6.5 billion in 339 rounds, as per recent research data from blockchain market intelligence platform Blockdata.
Q1 and Q2 enjoyed similar funding ATHs. Moreover, Q3’s high of $6.586 billion is nearly double the total funding raised throughout 2020. Last year, VC firms invested a total of $3.8 billion in crypto companies. Of Q3’s $6.58 billion funds, FTX exchange bagged the biggest share with its massive $900 million funding round in July.
Interestingly, the FTX funding round was the largest ever for a blockchain company. Sorare, a fantasy soccer game with Ethereum based NFTs, raised $680 million in Sept. Next comes BTC mining firm Genesis Digital Assets, which raised $431 million in its second funding round of the quarter.
Blockdata’s report also highlights Coinbase as the most active participant of the third quarter funding rounds.
Crypto Investors Ignore China, U.S
In Sept, China’s second-largest real estate firm, Evergrande, collapsed under debt worth $300 billion. The resulting shockwave pummelled crypto markets, sending the total market cap below $2 trillion. Later on, China announced its decision to ban everything crypto, from mining to trading.
The result was major exchanges stopping new registrations from numbers registered in mainland China. Moreover, the popular crypto exchange, Huobi, took the worst hit as the exchange relied on its Chinese customer base for most of its profits.
On the other side of the globe, U.S Federal Reserve chair Jerome Powell said in a Congress hearing that the fed does not plan to ban cryptos but regulate it. Meanwhile, U.S SEC chair Gary Gensler emphasized his organization cannot ban cryptocurrencies, but Congress has the power to do so.
As such, the call to either regulate or ban cryptos is growing since governments are wary of the illicit uses of cryptocurrency. However, given the growth of funding in Q3, it seems VC firms remain undeterred by either China’s crypto ban or the U.S plans of regulating cryptocurrencies.
After China’s crypto ban, Bitcoin and altcoins saw a sharp drop in prices. However, the overall crypto market bounced back as traders, mainly from mainland China turned to DeFi and decentralized exchanges to find a haven for their crypto activities.
The meteoric growth of NFTs also attracted significant funding. In Sept, Dapper Labs and Sorare, two sports-themed NFT related startups, raised a combined $930 million in funds. The NFT sector currently has a market cap of $39.5 billion, and with its increasing popularity, the numbers are bound to rise.
Cryptocurrency companies now offer nearly every financial product that is available in the traditional financial system. Moreover, increased institutional interest in cryptocurrencies is another reason VC firms invest heavily in crypto companies.
What’s Lies Ahead
The SEC approved an ETF that provides investors exposure to companies that either have Bitcoin in their balance sheets or are involved in Bitcoin lending, mining, or manufacturing mining equipment. The SEC’s decision raises hopes for a pure BTC ETF that awaits approval from the regulatory body.
Furthermore, the upcoming Taproot update of Bitcoin would likely boost BTC prices, attracting more investors. The update plans to bring smart contract capabilities to the Bitcoin blockchain. Experts have also highlighted altcoins such as Avalanche (AVAX), Cardano (ADA), Polygon (MATIC) as the altcoins to watch in Q4.
Avalanche is an Ethereum-competitor that claims to be faster than Ethereum. Steve Ehrlich, CEO of crypto-asset broker Voyager Digital, believes Avalanche would attract more traders and NFT customers ‘as soon as they start adding some projects and art on their NFT network.‘
The Voyager Digital CEO that Cardano also holds potential in the NFT market.
Additionally, JP Morgan’s Nikolaos Panigirtzoglou wrote in a research note that Bitcoin’s potential as an inflation hedge is drawing institutional investors back to the crypto market. The analyst highlighted Bitcoin’s recent surge over the $50k level and pointed out Ether’s 393% rise YTD.
There are tentative signs that the previous shift away from gold into bitcoin seen during most of Q4 2020 and the beginning of 2021 has started reemerging in recent weeks
Nikolaos Panigirtzoglou said.
As such, it seems VC firms, investors, and traders would continue flocking towards the crypto industry.
A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.