Investment into Bitcoin startups is shrinking. That is according to Coindesk’s
latest report on the state of Bitcoin and the Blockchain.
The title of this particular report-State of Bitcoin and Blockchain 2016-however, is probably misleading to many as to the period it is about.
As a matter of fact, and unlike the previous quarterly ones, the report summarizes the events and trends of the entire 2015.
Before getting ahead of ourselves, who are Coindesk?
Coindesk is among the first news sites specializing in bitcoin and digital currencies to be established. Aside from furnishing the Bitcoin community with the daily news, it also offers one of the most comprehensive Bitcoin price indexes.
And for the last two years, carrying out research in the Bitcoin and Blockchain ecosystem and publishing quarterly reports has gradually become one of the other things Coindesk is known for.
Now back to the State of Bitcoin and Blockchain 2016
Among many metrics that are on the report, one indicates that investment into Bitcoin startups slowed notably in the last three months of 2015. “While 2015 VC investment was greater than 2015,” reads part of the report, “the growth rate slowed in 2015 by about 3%.”
A statement like the one above might leave some wondering whether those like Mike Hearn, a protocol developer who ditched Bitcoin for
R3, a private Blockchain project, saying that Bitcoin is failing, are right.
However, looking at other figures in the same report, a different story is told; Bitcoin is anything but declining. For instance, the number of wallets doubled and trading volumes increased by about 424% in the year.
And despite what many might think, blockchain startups did not do any much better than Bitcoin startups in 2015. Not even with many financial institutions and government authorities calling for
attention to be turned away from Bitcoin and directed towards its underlying technology, the Blockchain.
In the last quarter of 2015,
Coindesk reported Bitcoin startups received 92% of all the investment money that went into the cryptocurrency technology. In the third quarter, the ratio was 53% Bitcoin, 47% blockchain.
What then is happening?
The report itself has suggested several explanations for the declining investment into Bitcoin startups. One of these is the view that investment is declining elsewhere too.
“Total VC investment across all tech sectors decreased 9% from $31.1 billion in 2014 to $28.2 billion in 2015, and the number of deals decreased 13% from 2014,” the report explains.
The New Year seems to have started on the right footing, as far as investment is concerned, for Bitcoin and Blockchain, though. Since the beginning of 2016, several Blockchain startups have managed to raise substantial amount of investments.
One of those that has done that is Digital Assets Holding; a company started in 2014 by Blythe Masters, who is an ex-JPMorgan executive. Towards the end of January, the York-based blockchain startup
raised about $60 million from several investors including Goldman Sachs and IBM.
Another significant investment to a Blockchain startup was made to Blockstream, a Montreal-based startup building solutions on the blockchain for various use cases. The Blockstream managed to
raise $55 million at the start of the month of February 2016.
Other Bitcoin and Blockchain startups that have raised significant funding so far in the first quarter of 2015, including Gem, $7.1m, Simplex, $7 Million and Blockchain Capital, $13m.
As to whether all these will change the Bitcoin investment narrative when the Coindesk releases the next report in the next few months, is not all that clear at the moment. However, the trend points to the fact that there is still a lot of investor interest in the technology.
About the Author
Rupert Hackett is the Community Manager at BuyaBitcoin.com.au. Rupert specializes in the digital currency and digital payment space and is currently studying the world’s first Master's in digital currencies alongside entrepreneurship. He writes for multiple bitcoin and tech websites and regularly blogs for buyabitcoin.com.au