In 2019, the term blockchain has become popular throughout the country, and the blockchain has become a business incense. The many benefits provided by blockchain technology also inspire governments and businesses to adopt, explore, and invest in them.
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However, in 2019, the amount of investment in the blockchain ecosystem has shrunk significantly. After the inflow of funds reached a peak of $ 5.5 billion in 2018, the amount of financing by blockchain companies this year was less than $ 3 billion.
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There are many reasons for this phenomenon. For example, as the value of Bitcoin dropped from an all-time high of $ 20,000 to a low of $ 3,100, people's investment sentiment was greatly affected. Secondly, the initial coin offering (ICO) also lost its earlier glory. Of course, the decline in the overall financing level of the fintech industry will also lead to a sharp decline in the funds raised by blockchain companies.
Blockchain companies' financing in 2017-2018
2017 was a hot year for ICOs. Most of the funds raised by blockchain companies come from ICOs. The Bancor agreement groundbreakingly raised USD 153 million through the issuance of tokens, setting the standard for a new generation of financing methods.
ICO has become a global phenomenon, and a large number of token sales projects have appeared in Israel, Singapore, China, the United States, Germany and other places.
It can be said that 2017 is the year when the ICO rises, and 2018 is the year when the market adjusts. The total market value of cryptocurrencies reached an all-time high in January 2018, and then plummeted.
Institutional investors are becoming interested in financing because they worry they will miss the last leg of this wave of wealth-making. Robinhood and Coinbase secured financing. Bitmain, the main manufacturer of ASIC miners, also raised nearly $ 340 million in a round before the listing, with a valuation of more than $ 12 billion. However, the company's valuation has shrunk due to falling demand for mining machines.
Blockchain companies' financing in 2019
In 2017, some insiders thought that ICO would make traditional venture capital history, but now, the ICO wave is outdated.
Venture capital funds are still interested in the blockchain ecosystem, but this time, the financing rounds of blockchain companies in the later stages are more favored. Robinhood raised $ 323 million for four consecutive years and raised $ 50 million in Series E funding.
In an interview with Cointelegraph, Sidharth Sogani, CEO of rating company Crebaco Global, said that compared to 2018, blockchain companies have seen a decrease in funding. He stated:
According to our statistics, more than 95% of blockchain or crypto projects end in failure. Most projects are scams or MLM, and many project teams lack expertise and they don't know how to lead a company. From early 2018 to June 2019, the market lost more than $ 10.6 billion. This is the main reason why traditional institutional investors are reluctant to enter the field, they do not know how to evaluate this technology, and they do not know the feasibility of the project.
Nevertheless, in terms of adoption rate and amount of funds, 2019 is the year of enterprise-level blockchain admission. Although the number of blockchain projects receiving financing has decreased, the number of investors per financing has increased, and more funds have been invested in each project, indicating that the blockchain investment market has matured. This is particularly evident in China. In the first half of 2019, China's blockchain startups raised 71 funds and raised US $ 368 million. However, compared to 2018, the amount of funding for blockchain startups in China is still down 67%.
Are institutional investors interested in blockchain?
Institutional investors have long been optimistic about blockchain startups. Fidelity's global institutional investor survey found that 80% of investors believe that by 2025, blockchain technology will fundamentally change the entire industry.
Among them, Digital Currency ranked first in the investment list with 95 blockchain companies. The companies it invested in included Coinbase, Circle and Figure. Pantera Capital has invested in 55 blockchain companies, while BlockchainCapital has invested in 47. Other well-known investment institutions in this field include Blockchain R & I, Boost VC, NGC and 500 Starups.
In addition, IBM has invested more than $ 200 million in its blockchain-based IoT data sharing solution; since 2016, Google has also been developing blockchain-related projects.
At the beginning of 2018, the number of early investors has been high due to the early returns on Bitcoin and Ethereum. After the market price began to fall and gradually stabilized, these early investments did not make subsequent investments. This shows that although early financing is relatively easy, many venture capital companies are waiting for a more certain basis before further investment, such as the application of blockchain products and company income.
Raullen Chai, CEO of IoTeX, a Silicon Valley-based IoT company, said in an interview with Cointelegraph:
We have transitioned to a new phase of the industry, which places more emphasis on letting customers use blockchain and blockchain-based products rather than focusing on startups.
The adoption of blockchain technology is still growing
Blockchain technology was originally considered as a tool to help the financial industry, but now it is being applied in areas such as network security, healthcare, agriculture, and supply chain. Companies no longer question the usefulness of blockchain, but are actively looking for ways to integrate the technology into their existing systems.
Blockchain players in the payment space like Ripple are strengthening their partnerships with non-bank payment providers, which may be more suitable for blockchain technology.
In 2020, the adoption of blockchain will grow further. For example, gaming giant AMD has announced its joining the blockchain gaming alliance. The gaming industry has been a pioneer in adopting emerging technologies. As an industry that attracts a lot of capital, it is clear that more funds will flow into the blockchain industry.
In addition, a Gartner study found that by 2030, blockchain is expected to generate $ 3.1 trillion in new business value. The study also emphasizes that 2023 will be a turning point for mainstream adoption of blockchain technology as companies begin to explore more realistic ways to utilize blockchain technology. Sogani is optimistic that 2020 will be the year of the blockchain. He stated:
According to our observations, blockchain has a specific venture capital group. Traditional venture capital still needs time to understand the technology. But as this industry becomes more standardized and mature, and there are fewer and fewer scams, traditional venture capital will gradually enter this industry. I believe 2020 will be the year of glowing blockchain.