Early Investing

Explosive Returns Drive Record Crypto Investment

Explosive Returns Drive Record Crypto Investment
By Adam Sharp
Date November 12, 2021

Venture capitalists (VCs) invested a record $6.5 billion in crypto in the third quarter of 2021. Here are some highlights from a November 2 CoinDesk article.

The U.S. continued to lead the world in VC funding into the crypto industry, investing a record high of $2.97 billion in the third quarter, up slightly from the second-quarter figure of $2.87 billion and the fifth consecutive quarter of increases overall. For Q3, the U.S. was followed by Asia with $1.4 billion invested, and Europe with $1.1 billion.

Globally, crypto exchange FTX’s $900 million funding round led all equity deals in the third quarter, followed by a $680 million raise from France-based non-fungible token (NFT) platform Sorare and a $431 million funding round by bitcoin miner Genesis Digital Assets, according to CB Insights.

In all of 2020, VCs invested about $4.3 billion in blockchain/crypto. So $6.5 billion in a quarter is pretty incredible. And it’s important to remember this $6.5 billion number certainly understates how much was actually invested. A lot of funding in the crypto space is done using ethereum, bitcoin or other coins. No data service can possibly capture all the deals happening, even in the traditional world.

Absolutely Explosive Returns

It’s pretty clear what’s driving all of this. The people who invested early in successful crypto projects are absolutely killing it.

For example, look at Solana (SOL), an Ethereum competitor. Solana started trading in April 2020 at around $0.95. It trades at $226 as I write this on Friday morning. While that return is already incredible, the VC and angel investors in their private rounds blew those numbers out of the water.

According to Binance Research, the private seed sale token price was $0.04 in April 2018. It’s up more than 5,575x since. 

Early investors in Solana include VC firm Andreessen Horowtiz, which announced a massive new $2.2 billion crypto fund in June. I doubt the firm had any trouble raising that round and probably could have raised $20 billion if it wanted to.

FOMO Heating Up

The institutional FOMO I’ve been discussing for a while is really starting to hit. Everyone is rushing to get more exposure to crypto.

While it’s a little worrying to see so much capital pouring into the space, I think this bull run still has major legs. I’m especially bullish on bitcoin, which I continue to see as the safest way to play the space and the best long-term inflation hedge. The vast majority of institutional investors will start their crypto journey with bitcoin for the foreseeable future. 

But these up-and-coming projects like Solana cannot be ignored. They’re backed by some of the biggest players in the space and have the potential to revolutionize trading and lending markets. 

Yes, things are a bit frothy at the moment. But there is some truly incredible innovation happening in the decentralized finance space. I’ll be covering it more going forward.

Disclosure: Unfortunately, I don’t own any Solana.

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