A Venture Capitalist’s Guide to Cryptocurrency
Cryptocurrency and the blockchain space is the one of the fastest growing industries in the world. Many analysts believe that cryptocurrency will become a trillion-dollar market over the next decade.
Digital tokens are quickly becoming a favorite amongst savvy tech investors, it is becoming clear that adding blockchain based assets to a portfolio will be a must in the future. Investors, hedge funds and venture capital funds are looking to capitalize on the current cryptocurrency boom and the next great technological revolution. Seeing immense opportunity, several VC funds are actively investing in the sector.
Venture Capitalists Who Are Investing in Cryptocurrency
VC Fund: 1confirmation
Billionaire Mark Cuban is backing a new venture capital fund for cryptocurrency-related investments called 1confirmation that plans to raise $20 million.
Sequoia Capital, Andreessen Horowitz, Union Square Ventures and Bessemer Venture Partners
Hedge Fund: MetaStable Capital
Andreessen Horowitz, Sequoia Capital, Union Square Ventures, Founders Fund and Bessemer Venture Partners all invested in MetaStable, a startup hedge fund based in San Francisco that invests only in cryptocurrencies such as Bitcoin and Ethereum.
VC Fund: CrunchFund
CrunchFund is an early stage venture capital firm headquartered in San Francisco.
CrunchFund has started directly participating in cryptocurrency token sales.
VC Fund: Khosla Ventures
“Khosla’s bitcoin portfolio includes industry fundraising leader 21 Inc, which has amassed more than $120m in startup capital to date, as well as the sector’s largest pure technology play Blockstream.” Coindesk.com
Why Venture Capitalists Are Investing in Cryptocurrency
Successful venture capitalists are often visionaries who can identify trends in business and technology before they reach the main stream. This is definitely the case with cryptocurrency investments. Investors are beginning to see the value of blockchain technology and starting to understand how it could potentially revolutionize nearly every current institution and industry.
Cryptocurrency and more specifically the blockchain technology that makes it possible, are arguably the most important technological advancement since the launch of the internet. This technology will certainly shape the next decade and beyond.
While the prospect of building a better world on blockchain is appealing and may attract some investors, ultimately the money behind the cryptocurrency revolution is what is really turning heads. Currently there are several thousand digital tokens with dozens of tokens being actively traded.
The combined market cap of digital currency reached a record $161 billion. In 2017 alone the combined market cap of the cryptocurrency space grew nearly 800%. Many analysts are projecting the market cap could surpass $200 billion by the end of the year.
Venture capitalists are extremely interested in something called an ICO, which could potentially transform the process of raising capital. Initial Coin Offerings ICOs are the invogue form of funding blockchain based startups.
An ICO (Initial Coin Offering) is similar to an IPO or Initial Public Offering for a company on the stock market. However instead of issuing a stock, the project or company sells digital tokens similar to Bitcoin.
This creates a more engaging and accessible investment ecosystem. Initial Coin Offerings are becoming an increasingly popular way for tech companies to raise capital and for investors to potentially make huge returns by investing early. ICOs have become so popular that there are literally hundreds right now with more launching every day.
Many ICOs have raised millions of dollars in only a few short minutes. This summer, Initial Coin Offerings ICO surpassed early stage VC funding, raising more than $1.2 billion. Many projects raised millions in only a matter of minutes.
• Gnosis, the Ethereum based prediction market, raised $12.5 million in just ten minutes
• The Peerplays Blockchain Standards Association (PBSA) had already raised $4 million in private donations even before the commencement of the ICO.
• Bancor raised $150 million in their ICO
• U.S. startup Civic sold $33 million in digital currency tokens
• A start-up called Tezos raised over $230 million, setting a new ICO record.
Choosing the Right Project
It is important that people don’t get lost in the excitement surrounding ICOs and that they only invest in quality projects. Many ICOs may sound great but when you dig a little deeper you may find they are not all they are cracked up to be.
There are a lot of scam artists looking to take advantage of the current interest in the cryptocurrency industry. Investing in ICOs is a difficult task that requires a lot of research and a thorough understanding of the technology. Research and analysis must be done by looking at the website, whitepaper, development team, social media and GitHub in order to vet a potential investment.
ICOs can produce big returns but investors may want to focus on already established projects with tremendous growth potential. These projects are often the most successful investments.
One project that meets all of the criteria needed for a good cryptocurrency investment is BitShares. BitShares is not a startup trying to find its footing, they have been operational for three years. The technical work is complete and the technology has proven to be effective, robust and scalable to meet the demands of the emerging digital economy.
Scaling has become a hot topic in the industry lately as Bitcoin hard forked over its own scaling issues. BitShares, which is built using Graphene technology, is capable of processing 100,000 transactions per second, and can confirm transactions in an average of just one second.
The BitShares platform currently processes more transactions per day than all competitors combined. BitShares also offers a Decentralized Exchange (DEX) which provides high performance capable of handling the trade volume of the NASDAQ.
The industry is moving towards decentralized exchanges and by investing in BitShares BTS, the core currency of the network, investors will see the value of BTS rise dramatically as demand for the platform and the services it offers rises.
Recently several businesses including Crypviser and Bitspark have announced that they will be switching to the BitShares platform. BitShares offers a full suite of financial services with a wide range of utilities and applications.
Features include price stable currencies, user issued assets, and the creation of Distributed Autonomous Companies (DAC). Distributed Autonomous Companies run using an incorruptible set of business rules, eliminating the need for human involvement. This streamlines the business model making operations fast, efficient and much more profitable.
“BitShares does for business what Bitcoin did for money by utilizing distributed consensus technology to create companies that are inherently global, transparent, trustworthy, efficient and most importantly profitable.”
Currently all of the technology and world class team is in place. Marketing the platform and its services is the only remaining cost. BitShares has the very real potential of experiencing the same explosive growth we witnessed with Bitcoin. Growth of between 10x to 100x over the next two years is not only possible but likely. Imagine investing in Bitcoin in 2009, when it was worth pennies.
Why Now is the Time to Invest
With investing, timing is everything. If someone had made even a modest investment in Apple in the late 90s they would have made millions. Investing is all about getting in early ahead of a trend and profiting from its rise.
Bitcoin in 2009 was worth only a few pennies, this year Bitcoin hit an all-time high of over $4,500. Even though cryptocurrencies like Bitcoin and Ethereum have experienced explosive growth this year, we are still in the early stages of development for blockchain and blockchain based companies.
Tremendous opportunities exist for early adopters. Many of the projects right now could certainly turn out to be the next Google, Apple or Bitcoin. Even though the market cap of the cryptocurrency sector has grown nearly 800% this year, it is still small relative to other asset classes. Cryptocurrency is the future and now is the perfect time to invest, leveraging the explosive growth yet to come.