KPMG Predicts Insitutional Investment In Crypto Will Remain Slow This Year
- In the first half of 2022, venture capital firms invested $14.2 billion in cryptocurrency over 725 deals, but the growth will slow down in the second half of 2022, says KPMG.
- The most significant investments in the first half of 2022 came from Trade Republic ($1.1 billion), Fireblocks ($550 million), crypto exchange FTX ($500 million), and ConsenSys ($450 million).
In the first half of 2022, venture capital firms invested $14.2 billion in cryptocurrency over 725 deals, but big four accounting firm KPMG believes that investments will likely slow for the rest of the year.
The report published on September 6 by KPMG outlines that the most significant investments in the first half of 2022 came from the German crypto trading platform Trade Republic ($1.1 billion), Blockchain security service provider Fireblocks ($550 million), Bahamas-headquartered crypto exchange FTX ($500 million), and Blockchain software technology company ConsenSys ($450 million).
KPMG’s Global Leader of Fintech, Anton Ruddenklau-led team of authors revealed that the investment figures for H1 2022 alone are more than double that of all years prior to 2021, signaling “the growing maturity of the space and the breadth of technologies and solutions attracting investment.”
The Russia-Ukraine conflict, rising global inflation, rising interest rates, and overinvestment during the record-breaking 2021 and first half of 2022, according to Ruddenklau, will cause a decline in investment in the remaining months of this year. Ruddenklau predicts that retail firms that offer coins, tokens, and NFTs will be severely affected by the decline in interest in crypto investment.
Notably, data from July seems to support KPMG’s prediction of a decline in crypto investment, with monthly inflows into the blockchain VC market falling by more than 40% in the month.
“Some cryptos will die out—particularly those that don’t have clear and strong value propositions. That could actually be quite healthy from an ecosystem point of view because it’ll clear away some of the mess that was created in the euphoria of a bull market,”KPMG commented on the effects of the bear market.
However, the KPMG France Director of Blockchain and Crypto Assets, Alexandre believes that the “well-managed crypto firms with healthy risk management policies, long-term vision, and strong cost and risk management approach” will best position themselves to withstand the ongoing market downturn.
Additionally, KPMG anticipates increased investment efforts in underdeveloped financial technology markets, particularly in Africa. One major example of massive adoption possibilities in the region comes from the Central African Republic, which recently adopted Bitcoin as its legal tender.
Crypto exchange giant Binance has also been working on this front by conducting preliminary talks with the Nigerian government to establish a crypto-friendly economic zone. The two entities aim to foster long-term economic growth through digital innovation.