The institutions are actually here this time.
An unbelievable amount of money flowed into crypto in 2021.
Crypto funds saw record new capital raises and assets under management through appreciation of their core holdings. Some funds (e.g., Multicoin) are likely among the best-performing investment firms of all time and could continue to raise funds without any difficulty.
It's hard to grasp the scale of the private crypto fund market today. When we raised $25 million for DCG in 2015, it was one of the largest rounds ever for a crypto investment firm at the time. Today, Polychain, Paradigm, a16z, Multicoin, 3AC, and others each manage billions (some over $10 billion) or more, and what used to be our large round is now their mid-sized check.
Hedge funds plan to deploy 7% of their assets into crypto within 5 years, and pensions are starting to buy directly.
Against the backdrop of negative interest rates, large capital allocators continue to move up the risk curve, and most people can no longer ignore crypto.
The $3 trillion in circulating value created by crypto in 10 years can now rival all other venture-backed startups combined. Institutional entrants have noticed, and they will likely deploy capital in a way that ensures we avoid crashes (similar to the depth and length of 2014-2015 and 2018-2019). When new players enter the field, money tends to flow in two directions—upward and downward—but it doesn't leave. Capital may flow to higher β (beta coefficient, a measure of volatility relative to the overall market) emerging tokens, but when it cycles back up, it usually doesn't cycle out (except for taxes), instead staying in BTC or ETH or SOL or crypto "blue chips."
If you don't want direct exposure to tokens, you can still benefit; the demand for token infrastructure has created a boom in crypto unicorns, providing a hedge against exposure to underlying asset classes.
According to Dove Metrics, the $8 billion in private investments across 423 deals in Q3 alone accounted for nearly half of the $17.8 billion invested since the start of the year, surpassing the total of the previous six years. Nearly 90% of the largest deals in crypto history have occurred this year, not including Coinbase’s direct listing. About 75% of the funds were deployed into infrastructure and centralized services, and this was before the FTX and DCG announcements and possibly upcoming Binance funding announcements.
Institutions are really here this time～