【LongHash Column】Capital dynamics show: Acceptance of blockchain finance continues to increase

With the completion of Bitcoin's third halving, the spotlight is once again on Bitcoin, and the blockchain industry represented by Bitcoin has returned to the forefront of public opinion. However, after experiencing the boom of cryptocurrencies in 2017 and 2018 and the bubble burst in 2019, how has the development of the blockchain industry in recent years been?

Original Title: Capital Dynamics Show: Market Acceptance of Bitcoin Continues to Rise

We combine the Blockchain 2020 industry analysis report released by CrunchBase in the first half of this year, based on the international capital investment data in the blockchain industry since 2016 on the platform, to analyze the industry's development trends in terms of total industry investment amount, number of projects, and project types in the past five years. We also focus on observing and discussing the recent level of activity of capital in the sub-industry of blockchain finance.

The number of successful blockchain projects in 2019 is roughly the same as in 2018, but the total global financing amount for the blockchain industry in 2019 has significantly decreased, meaning that the average investment amount by capital in individual blockchain projects has decreased noticeably. At the same time, the total amount of equity financing in the blockchain industry in 2019 was $2.8 billion, compared to $370 million in ICO financing, indicating that equity investment has strongly replaced ICO as the investment method since 2018. Whether it is the noticeable decrease in the average investment amount in individual projects or the return of equity investment to the main stage, it undoubtedly shows that since 2018, capital's investment behavior in blockchain projects has become more cautious.

Of course, this does not prevent projects like Ripple (cross-border payments), Figure (on-chain collateralized loans and other financial services), and Proxicoin (stablecoin collateralized by assets like IP rights) from achieving financing goals of over $100 million in 2019. Apart from these three star projects, the top five funded projects in 2019 also include Finality International, a P2P financial market endorsed by UBS Group and Barclays Capital, and Layer1, a cryptocurrency asset management platform. It is evident that blockchain finance centered around cryptocurrencies remains the backbone of the blockchain industry.

As we further observe the series of actions taken by capital towards blockchain enterprises related to cryptocurrencies, we can intuitively see from the above chart that during the cryptocurrency market roller coaster in 2018, the financing for blockchain technology applications in industries unrelated to cryptocurrency management, custody, and trading has been steadily increasing year by year, with no correlation between the financing levels of these blockchain technology applications and cryptocurrency-related projects. This indicates that capital's confidence and layout for blockchain technology applications outside of cryptocurrencies have been growing year by year.

Looking back at the tumultuous blockchain finance, besides the well-known burst of the ICO bubble in 2018 and the subsequent downturn in the blockchain finance market from the end of 2018 to 2019, we still saw in 2019 that many payment platforms, protocol platforms, and mining infrastructure platforms based on blockchain technology have successively received considerable financing. Among them, the more eye-catching ones include the $30 million investment led by A16Z in April in the cryptocurrency payment platform Celo and the $25 million investment in mining infrastructure BisonTrails.

In addition, many financial technologies such as IBM Blockchain and Fidelity Digital Currencies are continuing to expand their footprint in cryptocurrency custody and trading platforms. Square added Bitcoin deposit functionality in 2019 and announced in early May that 3.8% of the gross profit of its Cash app in 2019 came from Bitcoin-related business. The U.S. stock trading platform Robinhood also expanded to eight new states in 2019, bringing its presence to a total of 46 states in the U.S. The expansion of these blockchain financial institutions and the layouts of traditional financial and tech industries in blockchain finance undoubtedly prove that despite the decline in the cryptocurrency market since 2018, blockchain finance is still growing in industry structure.

As Ledger, known for producing and selling cryptocurrency hardware wallets, launched its "anti-crime insurance" service worth $15 million in the third quarter of 2019 for its custody platform, this type of service undoubtedly provides favorable security protection for institutional investors entering the market and marks the gradual maturity of the blockchain finance industry.

At the same time, Bitcoin remains the "king of cryptocurrencies," especially during the pandemic, it has once again sparked discussions about challenging the status of the U.S. dollar since its inception. From the chart above, we can see that while media attention on the blockchain industry decreased in 2019 compared to the previous two years, the trading price of Bitcoin still doubled within 2019. The continuous increase in demand for Bitcoin from capital indicates that the market's acceptance and trust in Bitcoin are continuously growing. The development of the blockchain industry is also benefiting from the active state of Bitcoin and its community.

This article is from our partner LONGHASH