Need more proof that this is the year digital assets went mainstream? How about the fact that venture capital funds have poured about $30 billion into crypto, or more than in all previous years combined for the little more than a decade-old technology.
That is almost four times the previous high of about $8bn in 2018, or the year following Bitcoin’s more than 1,300 per cent breakthrough gain, according to transaction data compiled by PitchBook Data.
“We’ve moved beyond just digital gold. We’ve got financial services, art, gaming as a subcategory of NFTs [non-fungible tokens], Web 3.0, decentralised social media, play-to-earn – all of that made investors think 'We don’t have enough exposure',” said Spencer Bogart, general partner at San Francisco-based Blockchain Capital, one the largest investors in the industry after financing more than 120 companies since its inception in 2013.
As other established firms such as Coinbase Ventures, Digital Currency Group and Polychain Capital bet on the next big crypto thing, all manner of experimental projects – a social media app that turns celebrities into tokens, a play-to-earn non-fungible token game inspired by Elon Musk or a collectible consisting of a list of words – secured funding.
“Investors are funding anything and everything,” PitchBook analyst Rob Le said.
The sudden emergence of what was once considered niche sectors such as NFTs showed investors what they might be missing out on, according to Mr Bogart, noting how the once obscure online non-fungible token marketplace OpenSea is now drawing comparisons to the e-commerce site Etsy.
The $30bn tally includes fundraising rounds raised by the likes of Robinhood Markets and Revolut, revenue-generating financial technology companies that merely touch crypto. But looking strictly at US venture capital transactions also shows outsize investing this year with some $7.2bn in deals, four times the previous record set in 2018, according to PitchBook data.
Crypto derivatives exchange FTX, for example, closed a $1bn Series B funding round in July that pushed its valuation to $18bn. Custodian New York Digital Investment Group raised $1bn in mid-December, nabbing a more than $7bn valuation.
Forte, a provider of blockchain integration tools for game publishers, closed a $725 million fundraising round in November.
Dapper Labs, the NFT platform behind CryptoKitties, raised $350m in March from investors that included basketball legend Michael Jordan, pushing its valuation to $2.5bn.
Crypto payments infrastructure provider MoonPay, closed a $555m round late November, increasing its valuation to $3.4bn. Sky Mavis, the developer of Axie Infinity, raised more than $150m at a $3bn valuation in October for the the crypto-based online game.