Institutional companies and venture capitalists are showing increased interest in acquiring cryptocurrencies and investing in blockchain startups.
The high volatility of cryptocurrencies and the difficulty in calculating risks do not stop investors from investing in cryptocurrency companies. More and more large venture and institutional investors, including pension funds, are interested in actively investing in the industry.
Henri Arslanian, Lead Cryptocurrency Specialist at PwC, at
interview Bloomberg said there is even some competition between venture capitalists. Quite often, large investors outbid promising start-ups “on the vine” and systematically squeeze out small players from the market.
“Let’s say they are looking at a deal and think the startup is worth $ 10 million, but they see a big VC come in and offer a higher valuation. And this is not an isolated case, ”Arslanyan said.
According to analytical company CB Insights, in the first quarter, 129 startups raised about $ 2.6 billion, which is more than in the entire 2020, when it raised $ 2.3 billion in 341 deals. Analyst firm Pureprofile reports that 45 out of 50 pension funds and insurance companies in the UK and the US, with total assets of more than $ 80 billion, also plan to increase investment in the cryptocurrency industry in the next five years.
According to analysts, the increased interest and activity of investors in the digital market is taking place against the backdrop of resonantly significant transactions that were completed in the first half of 2021.
First, Block.one has invested about $ 10 million in a new cryptocurrency exchange Bullish Global. Coinbase Global, the largest US cryptocurrency exchange, has completed a direct listing on the Nasdaq and is now listed at $ 236. BlockFi, game developer Dapper Labs and cryptocurrency wallet service Blockchain.com have announced the successful completion of their investment rounds. Venture capital firm Andreessen Horowitz has launched a $ 2.2 billion Crypto Fund III, and finally, major financial market players, including Tesla Inc and MicroStrategy, have announced that they will continue to buy cryptocurrencies.
About 70% of respondents said they expect an increase in investment in crypto assets from pension and sovereign funds, insurance companies and other market participants, and about 30% believe that the growth rate of investment in cryptocurrencies will increase, and “in a radical way.”
Despite the positive sentiment around the crypto market, things are not so simple. Due to a complex regulatory system, most pension funds cannot purchase cryptocurrencies directly on exchanges, so they are forced to purchase shares of cryptocurrency funds or mining companies. There is also a shortage of startups on the market that can absorb investments amounting to hundreds of millions of dollars.
“If your minimum investment application size is about $ 50 million, not many companies have this status. If you have a large pension fund and you decide to place money in cryptocurrencies, there are no more than two dozen companies in the world that are looking for capital and at the same time can absorb investments of $ 100 million, ”Arslanyan said in an interview with Bloomberg.
We see numerous market “experts” announcing the cryptocurrency market as another “blowing up bubble”. However, the growth in investment was caused not only by speculation, but also by the deliberate actions of large players.
These include, for example, billionaire investor Paul Tudor Jones, who buys bitcoin in response to the Fed’s unprecedented money printing, and insurance giant Massachusetts Mutual Life Insurance (MassMutual). They bought more than $ 100 million worth of cryptocurrencies. Although this is a relatively small amount for an insurance company, it is enough to influence market sentiment.
“The purchase of MassMutual’s bitcoin represents another milestone in institutional investor adoption of bitcoin,” strategists at JPMorgan wrote in a note to clients. “Potential demand could emerge in the coming years as other insurance companies and pension funds follow MassMutual’s lead.”
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
