It’s a Great Time to Be a Blockchain Startup

February 9, 2021

History repeats itself, and in this case, when Bitcoin hits new price highs, venture capitalists invest more money in blockchain startups, per a recent article by Pitchbook. 

Here is the chart which shows the momentum in blockchain startup deals after Bitcoin rallies:

Chris Dixon from Andreessen Horowitz calls this the "crypto price-innovation cycle":

1) the price of Bitcoin and other crypto assets goes up, 2) leading to new interest and social media activity, 3) leading to more people getting involved, contributing new ideas and code, 4) leading to projects and startups getting created, 5) leading to product launches that inspire more people, eventually culminating in the next cycle.

This seems to be playing out now.  The runup in the price of Bitcoin has coincided with the strongest quarter for cryptocurrency and blockchain startups since the end of 2018, totaling $702 million in Q4 2020, according to PitchBook data.

Hot areas in blockchain investment:

  • DeFi.  Decentralized finance is one emerging area with a strong investor following betting that traditional banking services can be securely provided based on blockchain ledger technology; and
  • NFTs.  non-fungible tokens,, a class of tradeable digital assets like digital artwork or other collectibles.  Prominent examples include Cryptokitties and NBA Top Shots.

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