Discover How 900+ Funds Invest In Cryptocurrencies

This story introduces The State of Crypto Funds report, a data-driven report on the current crypto fund landscape realized by Crypto Writing Agency. You can find Part 2 there, and the full report on our website.

Since 2017, over 400 new crypto-native funds (funds that are exclusively focusing their investments on tokenized networks) have been created. Moreover, in the last two years, over 350 traditional funds, mainly VCs, have invested in tokenized networks, most often through traditional funding (Pre-seed, Seed, Serie A) but also sometimes through private pre-sales. That’s a lot of funds entering the market, bringing the total number of funds investing in cryptocurrencies to over 900, including 34 tokenized funds.

Extract from the State of Crypto Funds - a data-driven report by Crypto Writing Agency

Stages of investments & other activities

While all these funds invest in tokenized networks, strategies can differ from one another.

A vast majority (70%) focus on early-stages projects. As an example, over 25% of the 4500 investments realized by funds concern projects that haven’t released their tokens yet: DIRT Protocol, MultiVAC, ThunderCore etc. Some funds, such as Fabric Ventures, even go further and become active participants in the networks they invest in through staking, validating, running node etc. Cambrial Capital wrote a detailed article on the subject last week. Many funds also complete their offer by providing consulting, marketing, partnerships, exchange listing, legal structuring and technical development to the projects they finance such as Fenbushi Capital | 分布式资本 or Outlier Ventures.

Some (13%), focus on liquid digital assets. They use traditional & algorithmic trading strategies, arbitrage and behavorial economics to beat the market. Others also offer direct exposure to the Top10, 20 or 30 cryptocurrencies by market-cap through their indexes.

The rest (17%) invest both in early-stage projects and liquid digital assets, managing both an active and passive portfolio of cryptocurrencies.

Extract from the State of Crypto Funds — a data-driven report by Crypto Writing Agency

Countries of origin

If we take a look at the countries of origin of these funds, we can see that almost half of them are located in the United States. In fact, there are more funds investing in cryptocurrencies in the United States than there are in Europe, China, Singapore and South Korea all together. Indeed, American traditional VC funds such as Bain Capital Ventures (dY/dX, Basis, SpaceMesh) or True Ventures (ZeppelinOS, Fragments, Vault12, TruStory) invest much more in tokenized networks that their European counterparts. In France for example, the only traditional fund that has invested in a tokenized project is Kima Ventures, which invested in Mainframe back in 2014 long before they decided to build their network on top of Blockchain technology. In Europe, London seems to be the largest hub with 44 funds, including high-quality teams such as Fabric Ventures, KR1 & Carnaby Capital which alone totalize 74 investments.

Extract from the State of Crypto Funds — a data-driven report by Crypto Writing Agency

Funding Flows

Analyzing funding flows, we can see that American funds are mainly financing home-based projects, with 57% of their investments directed towards American projects. While Europe hosts some great projects (Raiden Network, Golem Project, Mainframe etc.) European-based projects still struggle to get as many investments as Singaporian & American projects. Even European funds are investing twice as much in the United States than in Europe. Moreover, due to the the lack of regulatory flexibility, some projects are legally registered outside of Europe eventhough they are building their product in Europe. In its amazing report The State of the Token Market, Fabric Ventures shows that 65% of the total capital raised in token sales by European Founders have been raised by projects based outside of Europe from a legal domicile perspective. Thus, Singapore is attracting many projects thanks to its regulated ICO approach, as well as many investments from Chinese funds and Singaporian funds themselves.

Extract from the State of Crypto Funds — a data-driven report by Crypto Writing Agency

You can find Part 2 there, and the full report on our website.