A new report offers a comprehensive review of the blockchain landscape, COVID-19’s impact on crypto, and what’s in store for the rest of 2020.
“Crypto not blockchain” was the dominant narrative in 2019. Not only did Bitcoin have a very good year (up over 90%), but investors continued to fund companies building crypto infrastructure. Incumbent financial institutions also looked to expand their service offerings in areas such as custody and trading.
So far in 2020, amid the COVID-19-driven market sell-off, it’s clear that Bitcoin still behaves as a risk-on asset, not a store of value (yet). But despite the broad weakness in crypto prices, companies continue to build and launch products that benefit the maturing blockchain ecosystem.
Funding dollars fell sharply in 2019 but deals were nearly flat. Total deals for the year were down only 2% YoY in 2019 but funding dollars fell over 30% as deal sizes shrank.
Deals are also showing a strong movement from West to East. Four years ago, 51% of deals were for US-based companies while only 2% went to China based companies. In 2019, the US’ share of deals fell to 31% and China’s rose to 22%.
“Crypto-corporate” VCs were the most active investors in 2019. NEO Global Capital and Coinbase Ventures were the two most active by deal count in 2019, demonstrating crypto companies’ commitment to funding their own ecosystem.
Enterprise blockchain funding has lagged though as efforts to reduce back-office costs and improve business processes are still ongoing. However, funding to other applications has been nearly 7x higher than to enterprise blockchain over the past five years.
Funding to crypto infrastructure continues as investors are still betting on custody, tax, data, and protocol infrastructure to improve the industry’s user experience. Bitcoin was on top until the coronavirus hit. Bitcoin’s price nearly doubled in 2019 despite dampened media coverage. Goldman Sachs named it the best-performing asset in 2019. However, since the coronavirus sell-off, BTC is down ~30% YTD.
Lending and stablecoins have driven the growth of decentralized finance (DeFi). There are over $1 billion in assets on DeFi platforms, up from ~$300 million in January 2019. ~60% of assets are on the Maker platform, a stablecoin project collateralized with cryptocurrencies.
Central banks are also got serious about fiat digital currencies. The future of programmable money could come out of a central bank, not a startup, as Central banks across the globe, such as in China and England, are exploring central bank digital currencies (CBDCs).
Equity funding to crypto and blockchain companies overtook Initial Coin Offering (ICO) funding in 2019 as the ICO boom collapsed under regulatory scrutiny. The ICO boom in 2018 ($7.8 billion raised) was largely unregulated. In 2019, total funding to ICOs fell to $371 million vs. $2.8 billion in equity funding to crypto and blockchain companies.