Major fundraisings by two separate crypto hedge funds indicate healthy support from the investment community for future crypto development. Grayscale Investments, a subsidiary of crypto venture capital behemoth Digital Currency Group, and Pantera Capital, along with Ikigai Asset Management, have recently raised $330 and $100 million, respectively, from new and existing investors over the past several months.
After monumental fundraisings in 2017 and then a dramatic collapse in valuations in early 2018, roughly 75% across the board, industry professionals, pundits, and the press at large were suspecting that investors might withdraw their support going forward. The crypto industry had shown material resilience in the past, but would it rise again from the ashes? The management teams for these three firms beg to differ with this general perception. Investors have not stepped back, but renewed their enthusiasm for the potential of this new technology and the assets that support its growth.
Michael Sonnenshein, managing director of Grayscale Investment, believes the response from investors has been robust: “Bitcoin prices doing nothing but go down the entire year has not deterred our existing clients from putting more capital to work. Asset inflows are really strong despite these price declines. Investors are taking the pullback as an opportunity to increase their exposure. The price has not slowed down the pace of investments — it’s actually caused us to broaden our relationships.”
The Grayscale experience is just one example of healthy support for cryptocurrencies. In the past few months, Pantera Capital and Ikigai Asset Management raised another $100 million for crypto industry initiatives. In their case, as well, the recent major correction in the market was not viewed as a deterrent, but as an opportunity for long-term gain. Travis Kling, Ikigai’s founder, noted that, “Throughout the past 10 years, the cryptocurrency market recorded four major corrections, all of which demonstrated drops of over 80 percent in valuation. The cryptocurrency market is merely at the start of exponential growth and the correction is a viable opportunity for new investors to enter. I believe crypto will create trillions of dollars along the way.”
The Pantera/Ikigai fundraising of $100 million was just the first of a two-part process that began in August. The firms are also targeting another $75 million raise, exclusively for “a venture capital-style fund to invest in cryptocurrency startups.” 140 investors supported the initial raise, which has “a 10-year long-term vision to invest in the cryptocurrency industry and emerging startups rather than cryptocurrenies like Bitcoin and Ethereum.”
The cryptocurrency industry has repeatedly rebounded after severe corrections, only to take on new investors, and then move on to establish new highs down the road. For critics that continue to label crypto assets as “fads”, the fact is that accredited investors and institutions are speaking with their wallets. Significant amounts of capital in support of an emerging technology are typically the precursor of unprecedented growth. Yes, there will be corrections along the way, but the cryptocurrency industry has proven that it is resilient, strong, and robust. Continued investor support is but more evidence.