Despite the price volatility experienced in the cryptocurrency sector, blockchain-centered startups raised a record amount in the second quarter of 2021.
Data provided by analytics platform CB Insights indicates that blockchain startups received funding amounting to $4.38 billion, representing an increase of 51.5% from the 2021 Q1 figure of $2.89 billion.
Payments company Circle received the highest funding at $440 million ahead of its plans to go public. The firm will go public through a $4.5 billion merger with a special purpose acquisition company, Concord Acquisition Corp.
The second-largest funding went to crypto hardware wallets manufacturer Ledger at $380 million.
The record funding indicates that investors are betting on the cryptocurrency sector to continue offering opportunities in the future. Furthermore, the industry is offering an alternative means to investors.
Notably, investors appear not moved by the recent drop in cryptocurrency prices. Early in the second quarter, Bitcoin attained an all-time high price of $64,800, but the asset has plunged by almost 50%, fuelled by factors like an increased regulatory crackdown. Furthermore, the industry attained a cumulative market capitalization of $2 trillion at some point.
“Blockchain’s record funding year is being driven by the rising consumer and institutional demand for cryptocurrencies. Despite short-term price volatility, VC firms are still bullish on crypto’s future as a mainstream asset class and blockchain’s potential to make financial markets more efficient, accessible, and secure,” said Chris Bendtsen, a senior analyst at CB Insights.
In the coming quarters, the crypto sector is expected to be at the center of startup funding as the industry receives more validation. Notably, several venture capital firms like Andreessen Horowitz are raising funds specifically meant for the sector. The firm recently announced a $2.2 billion fund for supporting crypto companies.
Startup funding hits record levels
The blockchain startup funding also reflects the activity across the entire sector. Our previous research shows that the global startup funding surged 157% between 2020 Q2 and 2021 Q2 from $60.7 billion to a record $156.2 billion.
Amid the record funding, most companies have also recorded a surge in valuations. For instance, the number of global unicorns spiked 491% between Q2 2020 and Q2 2021 from 23 to 136. The increase in unicorns and startup funding emerged despite the economic impact of the coronavirus pandemic.