2018 was not the year of cryptocurrencies but blockchain. The total venture capital investment in the blockchain industry scaled to $4.1 billion, marking an increase of almost 300 percent since 2017. This year, however, is witnessing a decline in interest in blockchain as the total investment is projected to drop by 60 percent.
Recent data from CB Insights estimates that VC firms have signed 274 deals with blockchain companies, investing a total of $784 million so far. Projecting the graph further to estimate the total VC investment through 2019, CB Insights predicts $1.6 billion as the peak amount that will be raised through 454 deals.
The firm has also predicted a sharp decline in corporate participation in the blockchain industry, which is expected to bring down corporate deals by 36 percent. Also, an increasing number of equity deals are going in favor of early-stage startups, it stated.
While projects like Facebook’s Libra have spiked up people’s interest in the blockchain and cryptocurrency sphere, it hasn’t added much to the investment coming in from VCs.
Investors are Investing in the Token Economy
It was bitcoin that created all the hype around blockchain. And it received its fair share of credit for that from investors. VCs initially were mostly trusting and putting their bet on companies trying to explore Bitcoin as a currency. Soon after, their interest shifted towards startups that were catering to the private blockchain needs of financial entities. With time, again, VCs interest seemed to have changed. They are now more inclined towards investing in the token economy, CB Insights noted. The analysis of equity investment data between 2014 to July 2019, revealed that 40 percent of the investment comes from the United States, followed by China, U.K., Singapore, and Korea contributing 15, 8, 4 and 3 percent respectively.
Blockchain is Not Dead
Every time bearishness floods a market, it mostly washes away the casual players, while the serious ones still stick to the game. Indeed data suggests that there is a steep decline in the total investment in blockchain companies, but it also indicates that more investors are now taking thoughtful decisions to invest in the industry. The hype is finally settling down and is giving space to more serious market players. It is also worth noting that an increasing number of big players are stepping into the blockchain industry to innovate and present better solutions. It can be said that the sentiments around blockchain are no more excessively pessimistic or optimistic. It is what it should be — realistic. What do you think is the reason for the decline in investments in blockchain startups? Is it due to fear or due to the increasing maturity of industry players? Let us know your thoughts in the comments below.
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