The 2017 market boom led to the new era of funding in the decentralized space called ICO, however as we entered the bear market not only ICOs dropped off the fundraising radar, it also turned out that a majority of them were scams. However, despite that, the funds kept flowing in the crypto market despite the large bearish sentiment.
2019 on the contrast, which was believed to be the year of bulls by many did not see such significant investment. A recent report from PwC suggests that in 2019 most of the crypto firms kept buying each other and despite that M&A as well as funding flow in the market was at its lowest when compared to the past couple of years.
The report suggested that even though crypto native acquirers took 56% of the fund flow in 2019, the total number of such deals fell to 114 from 189 in 2018. And if we look at the overall valuation of thee deals then there was a massive drop of 76% falling from $1.9 billion in 2018 to $451 million in 2019. The report also noted an emerging trend where the market leaders who went on an accusation spree did not bother to buy out their competitors and rather focused on small firms which were mostly service providers and instead of trying to grow vertically, most of these big players are trying to expand horizontally.
Overall Fundraising Dropped by 40%
The overall fundraising in the crypto space declined by a massive 40%, although equity fundraising in comparison saw a smaller decline of just 18 percent. Even though Bitcoin price picked some pace in the last two quarters the downturn in the traditional market took a toll on crypto funding as well.
The evolving regulations around the globe did help in increasing the corporate Venture Funding in the space which contributed 6 percent of the overall funding in the crypto market. 2019 also saw a change in investment trend, where a majority of the VC funding in 2018 went towards various blockchain infrastructure providers while a majority of VC funding in 2019 went towards crypto compliance and regulatory companies.
Another pattern observed from the PwC report shows that while a majority of these funding deals were concentrated in the USA, 2019 saw these funding deals mostly moving towards the Asian and European markets. Hong Kong has become a hotspot for companies looking for retail clients which are understandable given Singapore’s newly introduced regulatory framework.