Por Medha Singh and Lisa Pauline Mattackal
(Reuters) – Fearful of being left behind, private equity investors are rushing to cryptocurrency projects — blockchain-based applications and platforms powered by cryptocurrencies native to the virtual economies of the metaverse and the Web3.
Venture capital investment in these projects totaled $10 billion globally in the first quarter, the highest quarterly sum ever and more than double the level seen in the same period in 2021, according to Pitchbook data.
The 2019, 2020, and 2021 totals were $3.7 billion, $5.5 billion, and $28 billion.
“There is a lot of venture capital investing because everyone believes, as we do, that some of these protocols are the infrastructure of the future,” said Steve Ehrlich, chief executive of cryptocurrency exchange Voyager Digital.
The recent move is different from the past, when investment risk levels tended to follow the price of bitcoin, albeit with a slight delay, according to Alex Thorn, head of research at blockchain-focused bank Galaxy Digital.
Crypto investment levels have continued to grow during a Bitcoin price slump this year – it’s dropped around 16% – as well as during another decline last year.
“This decoupling is a demonstration of investors’ disbelief that a prolonged bear market in digital assets is at hand,” he wrote last week.
The venture capital cryptocurrency craze in 2022 also coincided with the 21% drop in the Nasdaq index.
The number of M&A deals involving cryptocurrency companies is increasing as the buzz grows around the metaverse and the decentralized online utopia of Web3.
There have been 73 deals closed so far in 2022, with a combined value of $8.8 billion, according to Dealogic, up from 51 deals worth $6.8 billion throughout 2021.
In many cases, blockchain technology companies are interested in the brand value of supporting established players and increasing integration with the financial system.
Some companies have been creative in raising money. Polygon, the platform for applications on the Ethereum blockchain, raised $450 million in February through a private sale of its cryptocurrency to investors, including SoftBank’s Vision Fund 2.
(Reporting by Lisa Pauline Mattackal and Medha Singh)