In brief
- Crypto fundraising crashed last year due to the pandemic.
- But a PwC report said it overall increased from 2019 to 2020.
- The amount of cash plugged into crypto projects hit over $3 billion, the report said.
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It turns out that 2020 wasn't so bad for crypto startups after all.
Despite a rough start to the year, the number of crypto fundraising deals rose by 33% compared to 2019, reaching over $3 billion in venture capital, according to a new report by PricewaterhouseCoopers (PwC). What's more, researchers at the Big Four accounting firm see 2021 shaping up to be the year more giant tech firms, such as PayPal, start going on bigger shopping sprees for crypto firms that provide "ancillary" services.
Venture capital fundraising all but crashed in the first half of 2020—thanks to the coronavirus pandemic and the economic turmoil it wrought—but if PwC’s report is anything to go by, it has made quite the recovery.
When the pandemic started really hurting the economy, VC funding for crypto projects fell dramatically by 50%. But it picked up again, thanks largely to institutional investors and a spectacular bull run and, according to PwC, the average fundraising amount rose by 68% from 2019.
On top of that, the total value of mergers and acquisitions (M&As) in crypto more than doubled last year to $1.1 billion from 2019. M&A is when companies and assets are consolidated through various types of financial transactions.
The biggest crypto M&A last year was when data analytics site CoinMarketCap was snapped up by Binance for $400 million.
Most deal activity is happening in the Americas, PwC said, but it is shifting away from that trend and more activity is now taking place in Europe and Asia. The average deal size in 2019 was $19.2 million; in 2020 it was $52.7 million according to the report.
PwC noted that it expects that the number of M&A deals to increase even more this year. What this means is that big players in the world of tech and finance will likely seek to buy up smaller crypto firms. Earlier this month, for example, PayPal confirmed its acquisition of crypto security firm Curv for nearly $200 million.
“We expect to see more institutional players consider entering in the crypto industry through investments or acquiring companies as part of their buy or build analysis in 2021,” the report said.
It added that the “crypto industry is continuing on its institutionalization journey.” This is thanks to media interest in digital assets such as central bank digital currencies (centralized cryptocurrencies controlled by governments), decentralized finance (DeFi—financial tools built on Ethereum), and the craze around non-fungible tokens (NFTs), according to the report.
The findings by PwC come at a time when more institutional players are entering the game. In 2020 and in early part of this year, the price of Bitcoin has continued to rise largely because mainstream companies, such as Square and Tesla, are now investing in the asset.