Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Amid the crypto market slump that 2022, some startups and ventures in the space are still commanding large amounts in funding.
Despite concerns over a steep drop in the price of digital assets, crypto startups are still raising funds in 2022. Several privately-held crypto companies reported massive cash injections in the hundreds of millions in January.
For instance, crypto exchange FTX, alongside its US affiliate, raised $800 million with valuations of $32 billion and $8 billion respectively. In addition, crypto infrastructure startup Fireblocks attained an $8 billion valuation from a $550 million funding round. Also, rival company Blockdaemon hit $1.3 billion in valuation after closing out a $155 million funding exercise. Although many of these firms made the capital influx announcements this year, negotiations likely kicked off late last year.
2021 is the year to remember for crypto and blockchain startups and ventures – as far as raising capital goes. The industry saw a record $25 billion in startup-generated funds, representing a massive eight-fold increment year-over-year (YoY). Much of this was borne out of a willing desire by venture capitalists to leverage the sustained rally of BTC and other tokens.
However, there was a sharp sell-off across the broader crypto market at the turn of the new year. As a result, prices of digital currencies steepened seemingly overnight and continue to taper off. BTC, the largest crypto by market cap, plunged to $33K in January from a record high of approximately $69K in November. Furthermore, BTC would end January at a drawdown of 18%, representing the token’s worst start in four years. The last time the leading digital currency registered anywhere near this number was at the beginning of a bear market in 2018.
Fears of Incoming ‘Crypto Winter’ in 2022 Grip Some Investors Regardless of Funding for Crypto Startups
Due to the recent downtrend, some investors are becoming apprehensive about the likelihood of a more severe downturn. The last time there was a “crypto winter” was at the end of 2017 and early 2018. During this period, BTC gave up 80% of its value since its then all-time high. However, CEO and founder of Blockdaemon, Konstantin Richte, reckons that there is no cause for alarm. He believes that there is no way crypto can remain in the slump for a sustained period, given its evidenced potential. As he put it:
“If we are entering ‘crypto winter,’ it’s unlike the bear markets we’ve seen before. The crypto market today has institutional adoption. They see the promise crypto holds. Many institutions are long-term bullish on the tech.”
Also, Michael Shaulov, the chief executive officer and co-founder of Fireblocks seemed to support Richte’s argument. According to Shaulov, the digital currency market has always been volatile and posed similar risks to investors in the past. However, Shaulov also believes that despite this, “what is very clear to us is that the investment in the infrastructure is not going to stop.”
Shaulov also predicted that the constant flow of capital into the crypto space will prevent it from completely going under.