US leads in crypto deals again, as Asia and Europe lag behind
–The growth of cryptocurrency worldwide goes beyond trades carried out on trading platforms, or the number of bitcoins moved from exchanges to cold storage wallets. Beyond trading, there are several crypto-related start-ups springing up all around the world. These start-ups proffer solutions to diverse crypto-related problems.
As the cryptocurrency space continues to grow, so are businesses designed to offer solutions to a wide array of crypto problems growing. And in the past five quarters, the number of crypto-related investment deals has increased significantly. In the third quarter of 2021, the crypto-related investment witnessed a massive increase as 12 new start-ups were supported in the first three quarters of 2021.
HOW THE UNITED STATES IS LEADING THE REST OF THE WORLD IN CAPITAL RAISED FOR BLOCKCHAIN-FOCUSED COMPANIES
Funding block-chain-focused companies has been on for a while, with many angel investors and venture capitalists recognizing the massive financial gains in the growing blockchain technology industry. Startups that cater for a variety of issues, ranging from the exchange and trading platforms to securities have been springing up in the last few years. This growth in the number of blockchain-focused ventures coincides with a time when venture capitalists are more willing to invest in these companies.
Will you blame them?
The dotcom bubble after the 2008 subprime mortgage crash is a fine indicator of how buying into a new technology in its nascent stage is financially profitable.
While many will say that blockchain technology and cryptocurrency, alongside trading platforms such as Redot.com, have been with us for a while, the space is just witnessing its first real sense of growth and massive adoption. So, strides have been made in the crypto space, the things that can be achieved are still so much that many feel we haven’t even scratched the surface of what is possible.
We have only just discovered NFTs and what we can do with it. There is so much that we have not unraveled yet.
Anyways, back to blockchain-focused companies that raised capital.
The United States is leading in the amount of capital blockchain-focused companies have raised, according to a report by CB Insights, a business intelligence firm. The report states that the increased amount of capital raised has been increasing since 2020, with 2021 third-quarter numbers the fifth consecutive quarter.
The report also states that US Blockchain-based companies have been able to raise $3 billion in the third quarter of 2021, beating the likes of Asia and Europe. The $3 billion raised is the highest of all time, and given how much the numbers have increased over time, the prediction is that the numbers will continue to increase.
USD 3 billion is a lot of money, especially when you compare it with how much was raised in the third quarter in 2020. In the third quarter of 2020, the report showed that the capital raised was USD 263 million. In 2021, that number was 1027% percent more, showing the massive increase in investments in crypto-related and blockchain-focused businesses.
These numbers are impressive, you’d agree with me.
But the same cannot be said of blockchain-focused businesses in Asia and Europe.
While the United States has always led in investments in blockchain-related businesses, the report for 2021 showed a wider gap from the rest of the chasing pack.
Asia is still second in terms of investment, but their USD 1.4 billion investment pales in comparison to the United States USD $3 billion. This is the first time that Asia has been behind the U.S in the number of crypto startups that raised capital.
WHY ARE ASIA AND EUROPE BEHIND THE UNITED STATES IN CAPITAL RAISED?
The reason for Asia’s poor numbers in capital raised for crypto-related startups is the strict rules that countries like China have placed on cryptocurrency.
Although other countries in the continent aren’t as stringent with their laws on crypto as China has been, China was the leading Asian country before the crypto ban. China had several mining rigs and many crypto-focused companies were springing up. Even countries such as South Korea had their fair share of blockchain-focused startups getting investment funding from venture capitalists.
But the recent spike in America’s number of startups focused on blockchain-related solutions shows how a government ban can have a ripple effect on an entire region.
For Europe, the reason behind the low numbers of startups and low investment capitals, $1.1 billion, when compared to the United States is multifaceted. But one major reason is how cautious the governments in most European countries are with cryptocurrency and blockchain technology. The political space isn’t as accepting as what America has. Not saying that America’s laws are very welcoming of cryptocurrency and blockchain technology. We’ve seen in the past how regulatory bodies have been fighting to regulate crypto and tax these digital currencies. These struggles are well documented. However, one can’t deny that America, especially following the China ban on crypto, became the next hotbed for miners and investors.
But the tides, when it comes to bitcoin mining rigs, are changing. We are witnessing the slow but eventual shift of many miners to South America. The tax situation in some South American countries, and the favorable weather conditions, have lured many mining companies to the Southern parts of the Americas.
Will these shifts in mining concentration affect the number of blockchain-based startups in South America?
One can’t say for certain, but it won’t be far-fetched if it did.
WHO’S BACKING UP THESE BLOCKCHAIN-SOLUTION-FOCUSED COMPANIES?
Getting startup capital is no small feat.
In America, Coinbase Ventures have been leading the way in investment on blockchain-focused companies. In 2021, after the third quarter, Coinbase venture had backed 24 companies in America. In China, LD Capital and Animoca Brand have invested in 11 companies.
Another interesting stat is that of the 31 unicorns in the cryptocurrency space, more than half of them are in the United States of America. 15 of the 31 unicorns!
The numbers are impressive, and if we are to go with the words of Chris Bendsten, an analyst at CB insights, the fourth quarter was looking good.
And it did.
In 2021, $30 billion was invested in crypto. The numbers are rising, and we can only hope for better things in the coming years.