The bitcoin rally has seen the cryptocurrency soar to unexplored highs and this has not only been reflected in the markets. Away from stock exchanges and over-the-counter offices fixing the price of BTC, the interest of private and institutional investors is increasing at a steady pace. Proof of this is the growth of crypto venture capital funds, which have raised billions of dollars in 2020.
On December 23, Seoul-based blockchain investment group Hashed revealed that it had raised $ 120 million for its first crypto fund. The company, led by CEO Simon Kim, intends to invest in disruptive blockchain startups, including base layer protocols similar to Ethereum. According to Kim, the next wave of crypto networks will mark the beginning of the “protocol economy,” an era in which data and value is transmitted globally through crypto networks using a shared public ledger. He predicts strong government and institutional support for this new paradigm and has had no trouble selling the group’s first venture capital fund.
Blockchain startups from the investor circle
Accredited investors are limited in terms of the crypto assets they can trade, primarily comprised of BTC and ETH through regulated brokers and custodians. Blockchain funds offer an alternative way to gain exposure to digital assets and the ecosystem they support. As bitcoin has broken new records, surpassing $ 22,000, some investors are looking beyond the 12-year-old cryptocurrency to start the next wave of blockchain networks.
Data from research group The Block shows that a record $ 900 million was invested in blockchain startups in the third quarter of 2020. Investors have been rushing to start decentralized funding projects in particular, including those focused on portfolio management, loans and derivatives.
Public networks of private investor funds
No one knows where Bitcoin creator Satoshi Nakamoto is from, with speculation placing him everywhere from London to Los Angeles. What we can say is that the movement he launched, based on blockchain technology, has grown into a borderless industry that attracts major investments around the world. In the United States, Andreessen Horowitz’s a16z subsidiary was founded to seek out promising crypto startups, alongside companies like Pantera Capital and Galaxy Digital, led by seasoned investor Mike Novogratz.
In Asia, meanwhile, Hashed is not alone in securing private investments to fund public blockchain networks. A number of cryptocurrency exchanges, including Binance and BitMax, have their own venture capital arms, tasked with nurturing next-generation crypto businesses. The symbiotic relationship often results in the same exchanges listing the native token of the projects they incubated once they have reached maturity.
It’s not just VCs who have sought exposure to blockchain. Family offices and hedge funds have also taken an interest in the space. Harvard University’s investment arm is an endowment fund that has previously jumped into the crypto market, joining two other investors in an $ 11.5 million investment in crypto firm Blockstack. Yale University is also known to have made a significant investment in cryptocurrency.
The institutional case of crypto
Bitcoin is going through the early stages of a new asset class, from suffering from the first bubbles to luring scammers with their get-rich-quick schemes. The foam on the market has been tempered by robust products aimed at a professional audience. Crypto is significantly more mature now than in 2017, when BTC last hit the heights it is currently trading at. Today, the industry supports a healthy futures market, while improved options and custody have all anchored bitcoin while making it acceptable to institutional investors.
Elon Musk’s flirtation with bitcoin, which has largely consisted of tweeting crypto memes to his 41 million subscribers, suggests a deeper interest in digital currency. In a typical musky style exchange On December 20, Tesla CEO was encouraged by Michael Saylor of MicroStrategy to follow his lead and convert part of Tesla’s cash reserves to BTC.
“Are such large transactions even possible?” musk mused, to which bitcoin bull Saylor replied in the affirmative, before offering to show Musk how.
Bitcoin’s low correlation with traditional assets forced some investors to rebalance portfolios that were heavy in bonds and stocks, allocating a tranche to BTC. Daring investors, however, are looking beyond bitcoin for the possibilities offered by new blockchain protocols, where the risk-reward is higher, as is the potential for outsized returns.
Businesses Catch the Crypto Bug
As institutional investors buy bitcoin and invest in the industry that forms around it, companies are testing their own blockchain solutions. Hashed publicly supported Kakao, responsible for developing the country’s Klatyn blockchain, and the LINE blockchain, owned by LVC Corporation of Tokyo. Big Four accounting firm KPMG, meanwhile, expanded their blockchain strategy, helping Microsoft, Tomia and R3 develop a solution for the 5G network and file their own blockchain patents.
In this context of business innovation and private blockchain investment, VCs have seen crypto funds fill up quickly. This digital gold rush has spurred a booming company into choices and shovels – the tools and applications to interact with the next wave of decentralized protocols.