Venture capital investment in crypto firms is on a roll.
Institutional funds continue to flow into the crypto space as traditional and crypto firms look to gain strength in the bear market.
As retail investors dump crypto, institutional investors are piling into the space and see it as an opportunity to determine their digital asset strategy ahead of the next bull market.
Two trends seem to be emerging: increasing crypto-focused venture capital investments and more traditional asset managers giving institutional clients access to crypto assets.
Following the $720 million fundraising from the New York Digital Currency Group, Brevan Howard Digital and Morgan Creek Digital recently led a $40 million funding round for video game company Horizon Blockchain Games.
Toronto-based Horizon will use the funds to build its Sequence video game development platform, Niftyswap, an NFT marketplace, and a digital trading card game.
Cryptocurrency Companies Make Significant Investments
Brevan Howard Digital provides institutional investors with access to crypto assets, while Morgan Creek Digital counts Solana, 1inch Network, and Coinbase as part of its investment portfolio. Video game giants Ubisoft and Take-Two Interactive Software were also part of the fundraising event.
As of the end of September 2022, NYDIG raised approximately $720 million for a Bitcoin fund, according to an SEC filing.
The company behind the NFT Doodles collection raised $54 million from Reddit co-founder Alexis Ohanian’s venture capital firm Seven Seven Six and FTX Ventures to fund music and gaming lines of business.
Mining company Rhodium Enterprises recently announced that it plans to raise funds through a reverse merger with SilverSun Technologies, a company that acquires and develops technology and software companies.
Following the merger, SilverSun shareholders will be granted an approximately 3% equity interest in Rhodium.
BlackRock Backs Cryptocurrencies, a Signal for TradFi Companies
BlackRock, the world’s largest asset manager, recently unveiled plans to launch a Bitcoin spot private trust. Private trusts are based on the price of an underlying asset and are listed on a public stock exchange.
Investors can buy shares of the trust using a brokerage account, which eliminates the need for them to hold Bitcoin directly.
The trust company takes money from institutional investors and buys BTC or another crypto asset, which it stores in a fund. This makes the institution the holder of the digital asset instead of the investors.
BlackRock’s recent partnership with Coinbase is designed to enable its institutional investors to access products from Coinbase’s Prime offering using BlackRock’s Aladdin asset management software.
Coinbase Prime, which is an institutional prime brokerage platform, serves around 13,000 institutional clients.
For the money manager, the association is based on greater institutional demand. Joseph Chalom, Global Head of Strategic Ecosystem Partnerships at BlackRock, said: “Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational life cycle of these assets.”
The British company Abrdn recently bought a stake in Archax, a cryptocurrency exchange.
ETPs Set for a Bullish Rally despite Exits
Despite falling cryptocurrency prices, asset managers including Charles Schwab launched 40 exchange-traded cryptocurrency products (ETPs) in 2022.
Cryptocurrency outflows from exchange-traded products have slowed as most retail investors have fled the market.
In the third quarter, investors withdrew approximately $18 million from cryptocurrency ETPs.
But Morningstar’s Kenneth Lamont told the Financial Times that these moves by asset managers could be proactive and that ETPs “are being launched in anticipation of the next crypto bull run.”
By Audy Castaneda
