Account Manager - Digital Assets
Last year, Superscript helped over 200 digital asset-related companies find insurance in both the London and Bermudan insurance markets. This influx of submissions was a sharp increase on the previous year, providing us with a unique perspective on the trends and overall pulse of the market.
2021 proved to be an important year for digital assets, with wide-spread institutional adoption, the rise of NFTs and Metaverse-related businesses and other key developments that continue to drive the sector forward.
In this article we’ve outlined the investment trends in the Distributed Ledger Technology (DLT) space, and share why we believe 2022 is likely to be an even bigger year for investment in digital assets.
Investment grew in 2021
Since the beginning of 2021 there has been an explosion of capital flowing into the DLT economy, with the total market cap of crypto nearly quadrupling from ~$780B at the start of 2021 to a peak of almost $3T by November 2021.
The daily trading volume also peaked at a whopping $140B, with substantial amounts of trading by retail and institutions occurring on crypto exchanges.
Bitcoin, the most widely valued and traded asset, reached $1.25T at its peak which is the first time in history an asset has exceeded $1T so quickly. The scale of this achievement has led to the wider investment community taking notice, with this nascent asset class increasingly being brought into the view of more established and traditional market participants.
Key investment trends
The investment trends in the DLT landscape could not be clearer, 2021 was a record breaking year in every respect. This was outlined in a CB Insights report on the ‘State Of Blockchain 2021’, published in February 2022, which outlined the following statistics:
- $25B of Global VC investment poured in to Blockchain in 2021, a 700% increase from 2020
- 4% of total Global VC investment went in to Blockchain, a 400% increase from 2020
- 1,247 blockchain deals were closed in 2021 which has doubled from 2020
Three areas of investment dominated
Three key areas emerged in the DLT industry that received the most VC funding, which were the following:
- $6.4B or a quarter of all funding in 2021 went to crypto exchanges and brokerages, representing a 1,180% increase from 2020. A notable Q4'21 deal in this sector was a $100M Series A for CoinList, a marketplace for the best new tokens.
- $4.8B of funding went into Non Fungible Tokens (NFTs), up an astounding 130x from 2020. The sectors top deal in Q4'21 was Forte, an end-to-end solution for NFT gaming with a $725M Series B supported by a16z one of the leading VC’s in the space.
- $3.4B of funding went into Decentralised Finance (DeFi) as deals nearly doubled, hitting 240 and funding dollars also grew 850%. The sector’s top deal in Q4'21 was DeFi developer platform Alchemy with a $250M Series C also supported by a16z.
Who are the main investors in DLT?
In terms of number of deals completed, the top three global investors behind these trends were:
Coinbase Ventures which took top spot, 2021 was a record year with just under 150 blockchain deals made. Coinbase Ventures is the funding arm of Coinbase, one of the early exchanges in the space and still in the top 10 for trading volume. Coinbase Ventures provides financing to promising early stage companies with the simple goal to help the most compelling companies in the space flourish, their portfolio now consists of over 250 companies including BlockFi, Polygon and Uniswap. Their notable investments in 2021 include:
- FTX a leading crypto derivatives exchange
- Amber Group a frictionless marketplace creator
- Consensys the leading software company enabling developers, enterprises, and people worldwide to build next-generation applications on the Ethereum protocol
AU21 took the second spot funding 51 deals, AU21 is a China based VC dedicated to procuring value for teams expanding the frontiers of DLT, their portfolio includes Polkadot, Binance and Avalanche. Their notable investments in 2021 included:
- Polkadex a decentralized peer-to-peer exchange for the DeFi ecosystem
- Singularity DAO AI powered DeFi portfolios
- Stake DLT protocol developer
a16z was third with 46 deals. a16z has been investing in crypto companies and protocols since 2013, with more than $3B under management across three funds that are designed to include the best features of traditional venture capital, updated to the modern crypto world. Their portfolio includes Phantom, Compound and Solana. Their notable investments in 2021 include:
- Dapper Labs the blockchain platform behind NBA Top Shot and CryptoKitties
- OpenSea the world's first and largest NFT marketplace
- Helium a blockchain network that leverages a decentralized global network of internet hotspots
Also noteworthy is Coinbase co-founder Fred Ehrsam and partner Matt Huang who founded crypto VC firm Paradigm in 2018. Towards the end of 2021 Paradigm announced they had raised the largest crypto fund ever at $2.5 billion, to continue investing in the next generation of crypto companies and protocols. They said “this new fund and its size are reflective of crypto being the most exciting frontier in technology”, so it will be fascinating to see how the fund invests in 2022.
US leading the way
The US established itself as the leading Global center for VC investment in DLT in 2021, followed by Asia and then Europe. There were several notable highlights from the US:
- $14.1B was secured by US based blockchain entities, which was over half of the total funding in 2021. This included a notable $400M Series E for Fireblocks, a leading Digital Asset Platform for Institutions.
- New York was the crypto capital of the US with NY based entities raising $6.5B which accounts for nearly half of total US funding. This was led by a massive $1B round from NYDIG a leading institutional service provider and a $750M Series B for Celsius one of the leading borrow, lend and earn platforms.
- While Silicon Valley is first for overall VC funding, it was second for funding in blockchain at $3.9B with Los Angeles and Miami tied in third at ~$760M.
Not to be outdone by their US counterparts, UK VCs also participated in funding rounds of some of the biggest names in the DLT industry. Although the activity was not as high as the US investors previously mentioned, UK VCs are making a name for themselves on the global stage. The top UK investors include:
- Outlier Ventures which completed over 100 deals in 2021. Their portfolio includes investments in Cosmos, Chainlink, and IOTA
- Fabric Ventures completed 4 deals in 2021. Their portfolio includes investments in Near, 1Inch and Coinbase
- KR1 plc Europe's leading digital asset investment company also continued to support the DLT industry with 21 deals in 2021 including Moonbean, iTrust and Divergence
Top UK deals include:
- $60M Series C by Elliptic who provides blockchain analytics for digital asset compliance. Funding included an investment from Barry Silbert’s Digital Currency Group
- $17M Series A by Aztec an Ethereum Layer 2 protocol utilising Zero Knowledge Proofs to facilitate private payments, the raise including notable investment from Vitalik Buterin and Coinbase Ventures
Following the incredible successes of 2021, 2022 is also shaping up to be another bumper year for the DLT industry and we expect more record breaking statistics in the months ahead.
How we help DLT businesses
The Superscript Digital Assets team are embedded within the DLT space which gives us a greater understanding of the challenges businesses like those listed above face when looking for insurance. We don’t just insure your business as usual, we are at the forefront of emerging technology and emerging risk.
We are from the community and are building insurance solutions for the community, our experts are able to bridge the divide between the traditional insurance market and the emerging economy of digital assets. If you’re building technology or services in this space and would like to learn what your insurance options are, get in touch with our team.
Stuart Griffin has two decades of experience in the insurance industry, with a career that spans broking, underwriting and owning his own insurance business. Stuart’s not only an accomplished trader but also brings his knowledge of both insurance and digital assets to solve today’s complex risk challenges for each one of his clients.
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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