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Big Opportunity as Crypto Goes Mainstream

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Does anyone know of a venture capitalist who is against cryptocurrencies?

cryptocurrency on a black background
cryptocurrency on a black background

Source: WHYFRAME / Shutterstock.com

I’m sure there is someone out there… but every single fellow venture capitalist I interact with is very pro-crypto.

That’s not to say that we don’t disagree about what cryptocurrency is the best, how blockchain will develop or how decentralized communities will evolve… there are lots of debates surrounding those specifics.

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But as far as the broader crypto conversation goes, every private investor I know agrees that blockchain technology eventually will completely replace all legacy financial infrastructure.

This process, of course, will take time. And it will certainly involve some bumps along the way…

That said, with the amount of funding that is being plowed into crypto startups right now, we may see our financial system shift towards blockchain technology faster than we expect.

2021 Was a Banner Year for “Underground” Crypto Raises

Over the past several years, there have been hundreds of private investing funds launched to specifically target crypto startups.

Many of these funds are “underground.” By this, I mean the firms are not actively advertised and are only available to certain exclusive groups of people. I personally know of two New York-based private funds that only accepted Bitcoin (BTC-USD) from their limited partners (LP) as an initial investment, and both funds each raised over $100 million.

(A limited partner, or LP, is a person or a group that provides capital to a venture capital firm.)

2021 was an especially important year for the crypto venture capital (VC) world. Two mega funds were raised in a sign of investor appetite.

As reported by CoinDesk in June 2021:

“Venture capital giant Andreessen Horowitz (a16z) raised a whopping $2.2 billion for its much anticipated Crypto Fund III.

“The fund was initially rumored to be $1 billion. Later reports put it at $2 billion.”

Later in 2021, Paradigm, which was founded by Coinbase (NASDAQ:COIN) co-founder Fred Ehrsam and former Sequoia partner Matt Huang, raised a mind-boggling $2.5 billion.

That’s nearly $5 billion raised by just two funds in 2021. That money is already being actively deployed into today’s crypto ecosystem.

Despite last year’s huge fundraises and the recent (relatively) depressed cryptocurrency prices, venture capital firms are still raising money as fast as they can…

Recent Crypto Fundraises

Just this month there have been more announcements of new fundraises, which include:

  • VC giant Sequoia Capital just announced a new crypto-exclusive $600 million fund. This new fund will invest in “layer 1 protocols, layer 2 add-on systems, the data layer, decentralized finance (DeFi), centralized applications, payments, gaming, Web 3, non-fungible tokens (NFT), and consumer and enterprise infrastructure.”

  • Venture Capital firm Woodstock is raising $100 million from U.S. investors. The fund plans “to back the treasuries of blockchain protocols as an investor and otherwise snap up tokens on the open market and from third parties.” And “engage in staking and assist protocols with infrastructure development and governance.”

  • Although there are few details, meme stock giant GameStop (NYSE:GME) just announced that it will be launching projects in crypto and venture capital.

With the current pace of fundraising across the crypto ecosystem, TechCrunch says records could be beaten “in 2022 if early data indicates where capital will flow this year.”

Beyond record inflows of capital, there is also movement in big finance…

Big Finance Gets in on the Action

One of JPMorgan Chase’s (NYSE:JPM) top blockchain executives announced this week that she is leaving the banking giant. Although she has not disclosed where she is headed, it’s obvious that mega-funded crypto startups are willing to pay top dollar for experienced blockchain executives.

Meanwhile, Intercontinental Exchange (NYSE:ICE), who owns the NYSE, just announced that they made an investment in digital securities platform tZero. On tZero’s blockchain platform, you can buy and sell cryptocurrencies and NFTs (non-fungible tokens).

ICE CSO David Goone will become the CEO of tZero. This is a clear statement that the world’s biggest stock exchange is taking this very seriously.

Although I have recently spoken about how it’s likely we are in a blockchain bubble, that doesn’t mean that crypto and blockchain startups won’t see success.

Much like the dot-com bubble of 2000, there will be many losers as the industry develops and matures. But there will also be big winners.

The long-term picture is clear — this technology is here to stay.

We’ll be searching for those winners in the coming months.

On the date of publication, Cody Shirk did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

By focusing on megatrends that will shape the future, Cody Shirk uncovers generational wealth in the private investing space. To make sure you never miss Venture Capital Digest, click here to subscribe.

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