Cryptocurrency crash fails to put a dampener on cash-raising fiesta

Continuing to cash in while crypto is crashing…

| More on:
a man sits at his computer screen scrolling with his fingers with a satisfied smile on his face as though he is very content with the news he is receiving.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Crypto startups racked up a total of US$25 billion in funding last year
  • January saw a continuation in access to capital for crypto companies with FTX and Fireblocks gaining US$1.35 billion
  • One insider expects more to come as the industry matures

Even as cryptocurrency prices take a nosedive, cryptocurrency startups are raking in cash.

In fact, they raised a record $25 billion in 2021. This is an eightfold increase from the previous year.

While some investors may be growing wary of the collapse in cryptocurrency valuations, it doesn't seem to be putting a damper on investment in crypto and blockchain startups.

Taking the picks and shovels approach to cryptocurrency

January was another unkind month for crypto investors, following a trend that began in November last year. During the month, Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) tumbled a further 17% and 29% respectively.

Yet, some private companies operating in the crypto-sphere have been going from strength to strength. In doing so, raising mindboggling amounts of money to fuel more growth.

Crypto derivatives exchange provider, FTX closed another round of funding in January amounting to US$800 million, ballooning its valuation to US$40 billion. The additional injection of funds was backed by Temasak, Paradigm, the Ontario Teachers' Pension Plan Board, and NEA.

In another example of crypto companies raising funds despite the weakness in cryptocurrency prices, digital asset custody start-up Fireblocks scored $550 million in funding. The series E funding pushed the company to a sizeable US$8 billion valuation.

The institutional interest in these types of private companies in the crypto space exhibits a more 'picks and shovels' approach to the volatile industry. To a degree, these companies offer a 'safer' entrance into the growing cryptocurrency market.

US-based crypto exchange, Coinbase Global Inc (NASDAQ: COIN) is an example of this more traditional play. Irrespective of digital asset prices, the company continues to pull in revenue from people using its exchange.

In addition, Coinbase earns a small fee on crypto-assets in its custody. This was last reported to be more than 50% of the US$90 billion on its books.

What is driving this trend?

One would suspect that crypto companies would come under pressure as cryptocurrencies begin to falter. Especially when some spectators are anticipating the dawn of a 'crypto winter'.

So, what could be enticing sophisticated investors and institutions to keep pouring capital into these companies? Well, according to Fireblocks co-founder and CEO Michael Shaulov, part of the reason is maturing of the space.

Shaulov said:

What is very clear to us is that the investment in the infrastructure is not going to stop.

Further to this, the fast-growing crypto company co-founder highlighted more sophisticated uses of cryptocurrency. The potential posed by stablecoins and blockchain-based securities is attracting attention beyond speculation.

Motley Fool contributor Mitchell Lawler owns Bitcoin and Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns Bitcoin and Ethereum. The Motley Fool Australia owns Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Businessman smiles with arms outstretched after receiving good news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another strong showing from the share market today.

Read more »

Three miners looking at a tablet.
Resources Shares

Own ASX mining shares? Experts say an upswing in commodity prices has begun

HSBC economists Paul Bloxham and Jamie Culling explain why global commodity prices are rising.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Brambles, Lifestyle Communities, Northern Star, and Select Harvests shares are sinking

These shares are having a tough session. But why?

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop
Share Market News

Will the Reserve Bank wait for the US Fed to cut interest rates first?

Here's when AMP thinks interest rates will be cut in the US, Australia, New Zealand, Canada and the Eurozone.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Healthco Healthcare, Medadvisor, Ramsay Health Care, and Tamboran shares are rising

These shares are having a strong session. But why?

Read more »

drug capsule opening up to reveal dollar signs signifying rising asx share price
Share Gainers

If you invested $6,000 in Mesoblast shares a month ago you'd have $15,636 now!

Mesoblast shares have been on a tear this past month. But why?

Read more »

Gold bars on top of gold coins.
Gold

Is it too late to buy gold as an investment in 2024?

Can we still take advantage of gold at new record highs?

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Mergers & Acquisitions

Wesfarmers shares baulk on fresh acquisition gossip

A healthcare company gone nowhere in a decade might be on Wesfarmers' radar.

Read more »