Cryptocurrency Demand Fuels Record Level of Private Equity Blockchain Investment

Demand for cryptocurrency is sustaining record levels of private equity and venture capital investment in blockchain, the technology that powers it.

After raising a record $18.4 billion in 2021, blockchain businesses have attracted a further $5.03 billion in 2022 as of March 24, double the annual amount invested in most of the five years to 2020, according to S&P Global Market Intelligence data.

Cryptocurrency can hedge against inflation, a major headwind, as it is issued in finite amounts and does not fluctuate or erode in value like traditional currency, said Jackie McGuire, an information security research analyst at 451 Research.

Blockchain is "a promising emerging market with solid traction and growth that is delivering returns in multiples," McGuire said, adding that it has applications in other areas including contracts and copyrights, which could offer bigger investment opportunities for the technology.

The need to transform global financial infrastructure is one such opportunity. Big banks, asset managers, exchanges and central banks all need to upgrade their technology, Matthew Le Merle of Blockchain Coinvestors said on a panel at the SuperTechnology North America virtual conference on March 29.

Given the economic incentives tied to the technology, some of the largest banks globally "have built out public blockchain-based infrastructure and are just waiting for that regulatory clarity to push it out," Castle Island Ventures' Matt Walsh said during the panel discussion.

In the U.S., President Joe Biden issued an executive order earlier in March to ensure responsible development of digital assets.

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