Overview of 2020 Blockchain Investment and Financing Trends: Total Exceeds 3.5 Billion USD, DeFi Financing Quantity High but Amount Low

This article was published on PANews, author: Carol Bingbang.

In 2020, the blockchain industry thrived. The prices of BTC and ETH rose by 302% and 464% respectively, leading the digital currency market into a full bull market. The total market capitalization of the cryptocurrency market expanded from approximately $19.1863 billion to about $76.0056 billion, nearly quadrupling. Influenced by significant asset premiums, the mining scale of these two major digital currencies also expanded to about $7.6 billion, increasing the likelihood of miners obtaining excess profits.

Amid such a hot market, many new industry hotspots emerged in the blockchain field, among which DeFi attracted the most attention in 2020. According to statistics from Arcane Research, the locked value in DeFi grew by approximately 2100% throughout the year, with the number of unique addresses increasing tenfold.

The prosperity of the industry promoted the development of the investment and financing market. In 2020, global investment and financing in the blockchain sector maintained rapid growth, with the total disclosed investment and financing amount reaching $3.566 billion (excluding acquisitions). PAData will analyze the fundamentals, key tracks, and active investment institutions in the global blockchain sector in 2020 through public data, with a particular focus on the trends in mainstream industries such as DeFi, exchanges, and public chains.

A total of 407 projects raised $3.566 billion throughout the year, with the investment market most active in the fourth quarter

In 2020, a total of 407 projects in the global blockchain sector disclosed financing information (excluding acquisitions), with 434 investment and financing events occurring, and multiple projects completing multiple rounds of financing within the year.

From the timeline of disclosed investment and financing, the fourth quarter was the period with the most events, with approximately 151 disclosed events, while the third quarter had 126 events, the second quarter had 72 events, and the first quarter had 85 events. This trend is consistent with the overall market trajectory, as the number of investment and financing events steadily increased over the year.

Among the 434 investment and financing events, 306 disclosed the financing amounts, involving 293 projects, with a total disclosed investment and financing amount of approximately $3.566 billion.

In terms of monthly distribution of financing amounts, the fourth quarter also had the highest total disclosed financing amount, approximately $1.227 billion, accounting for 34.41% of the annual total. The other three quarters had similar total disclosed amounts, with the first quarter disclosing $827 million, the second quarter $779 million, and the third quarter $733 million. Notably, May and December were the months with the highest single-month disclosed financing amounts, reaching $476 million and $460 million respectively.

Exchanges had the highest average financing amount, while DeFi had many financing events but the lowest amounts

From the total financing amounts across various sectors, in 2020, cryptocurrency projects remained the most favored by capital, with a total disclosed investment and financing amount of approximately $1.720 billion, accounting for 48.37% of the annual total, nearly half. The second place was the industry application sector, which disclosed approximately $827 million throughout the year. The total disclosed investment and financing amounts for underlying technology and other ecosystems did not exceed $500 million, at approximately $490 million and $417 million respectively. Other cross-sector projects had even lower financing amounts, totaling less than $100 million.

Data note: “/” indicates that the project includes two subfields, such as “Tools / Protocols” indicating that the project product includes both tools and protocols, and so on.

Focusing on smaller sub-tracks, it can be seen that exchanges, digital asset management, and DeFi projects were the three types of projects with the highest total disclosed investment and financing amounts in 2020. Among them, exchanges disclosed a total financing amount of $896 million, accounting for 52.09% of the total investment and financing amount in the cryptocurrency sector, and 25.13% of the total investment and financing amount in the blockchain industry.

Closely related digital asset management projects have also received significant market attention in recent years, disclosing a total financing amount of $593 million throughout the year, making it the second-largest “money-raising” track after exchanges. In contrast, DeFi projects experienced breakthrough growth in 2020, with a total disclosed financing amount of approximately $278 million, accounting for 33.62% of the total investment and financing amount in the industry application sector and 7.80% of the total investment and financing amount in the blockchain industry.

Additionally, the annual total financing amounts disclosed for tools, protocols, stablecoin issuers, databases, payments, investments, and “Investment / Incubation” projects also exceeded $100 million.

Projects in different fields exhibited varying financing capabilities. In 2020, industry application projects disclosed the most investment and financing events, with 158 projects disclosing events, and among those disclosing financing amounts, the average financing amount per project was approximately $7.01 million, indicating relatively low individual financing capability. The financing capability of underlying technology projects was similarly modest; although 105 related projects disclosed investment and financing events, the average financing amount per project was only about $8.16 million.

In contrast, cryptocurrency projects and “Cryptocurrency / Industry Applications” projects had the strongest individual financing capabilities. In 2020, 114 cryptocurrency projects disclosed investment and financing events, with the average financing amount per project being approximately $20.72 million, while three “Cryptocurrency / Industry Applications” projects disclosed investment and financing events, with an average financing amount of about $20.57 million.

From the perspective of financing capabilities in sub-tracks, “Investment / Incubation” projects had the strongest individual financing capability, averaging $38.08 million, with Pantera Capital completing a $165 million fundraising in August and Bloccelerate completing a $120 million fundraising in December.

Other sub-tracks with strong financing capabilities included databases, exchanges, and digital asset management, with average financing amounts exceeding $20 million. However, DeFi projects had an average financing amount of only $4.8 million, making it the weakest track in terms of financing capability. Among them, the $50 million financing completed by cryptocurrency lending company BlockFi in August was the highest single financing event in DeFi for the year.

Early-stage investments dominated throughout the year, with 25 DeFi projects in seed round financing

In 2020, global investment in the blockchain sector was still primarily early-stage investments. Among the 434 investment and financing events, 296 disclosed their progress, with 98 in the seed round, 44 in the A round, and 38 in strategic investments, totaling 180 events, accounting for 60.81%.

In terms of major fields, industry application projects mainly disclosed progress in seed rounds and strategic investments, totaling 57 events. Additionally, there were 5 C round financing progress events, including data service providers Digital Asset and Chainalysis. Underlying technology and cryptocurrency projects primarily focused on seed rounds, A rounds, and strategic investments, with cryptocurrency projects also seeing one event each in C, D, and F rounds, involving stablecoin issuer Paxos, digital bank N26, and exchange Robinhood, with financing amounts all exceeding $100 million.

In terms of disclosed financing amounts across various forms, throughout 2020, the total financing amounts for B rounds, C rounds, and A rounds were the highest, all exceeding $350 million, with B rounds totaling approximately $466 million. The total financing amount involving ICOs also exceeded $225 million, indicating that ICOs remained a very important form of financing in the blockchain industry. In contrast, the total financing amount involving STOs was relatively low, at approximately $19.8 million. The only IPO event, the exchange INX, disclosed $7.5 million in IPO information in September, while mining company Hut8 disclosed Post-IPO information in July.

In terms of individual financing capabilities across different rounds, F rounds, C rounds, D rounds, and B rounds had strong financing capabilities, with individual financing scales all exceeding $40 million. Among them, F rounds had the strongest individual financing capability, with an average individual financing amount of $280 million, while the average individual financing amounts for the other three rounds also exceeded $40 million. Additionally, it is noteworthy that ICOs also had significant individual financing scales, averaging about $13.37 million. In contrast, the individual financing scale for STOs was relatively small, at less than $10 million.

In the rapidly developing DeFi sector in 2020, 25 projects disclosed seed round financing progress, and another 10 projects disclosed progress in other rounds, with an average individual financing amount of approximately $5.59 million. This was mainly influenced by A, B, and C round financing projects, which raised the average level; if only considering the average individual financing amount for seed rounds, it was only about $2.12 million.

In contrast to DeFi, among the public chain projects that disclosed investment and financing progress in 2020, ICOs and strategic investments were the main forms of financing, each involving 3 projects. Notably, Polkadot raised approximately $43 million through ICO, attracting significant attention.

35 investment institutions participated in more than 6 projects, traditional VCs had a more balanced investment layout

In 2020, a total of 705 institutions (including individuals) participated in blockchain project investments, with 35 institutions investing in more than 6 projects. The most active was NGC Ventures, which participated in 22 projects, including ForTube, Linear Finance, and MaiZi Wallet. Additionally, Pantera Capital, Coinbase Ventures, Alameda Research, and Polychain Capital invested in more than 15 blockchain projects. ParaFi Capital, HashKey Capital, IOSG Ventures, Digital Currency Group, Dragonfly Capital, Framework Ventures, and Three Arrows Capital all invested in more than 10 projects. These 12 investment institutions were the most active in investment activities in 2020.

Without considering differences in leading and following investments, the estimated average investment amount per investor can be calculated by dividing the total financing amount by the number of investors. This is merely an estimate, and due to the neglect of differences, the results can only provide limited reference for understanding investor behavior.

According to statistics, in 2020, 29 investment institutions had total investments exceeding $20 million in the blockchain sector, among which Guy Schwarzenbach and Addition had total investments exceeding $100 million. Public information shows that Guy Schwarzenbach invested $103.4 million in Swiss crypto bank SEBA in January 2020, while Addition participated in data service provider Chainalysis in December, with an estimated investment amount around $100 million.

Additionally, Baidu, Pantera Capital, and Ribbit Capital all had total investment amounts exceeding $60 million in 2020. Among them, Baidu, one of the internet giants, invested $85.1 million in Yuxin Technology in January, while Pantera Capital and Ribbit Capital diversified their investments across more projects. For instance, Pantera Capital invested in Acala, Amber Group, Balancer, DODO, Wyre, etc., while Ribbit Capital invested in Chainalysis, Lightning Labs, and Robinhood.

Investors from different backgrounds have different investment logic and preferences. A simple classification of investor types shows that exchanges have more densely invested in cryptocurrency projects related to their own business, with exchanges collectively investing in 13 cryptocurrency projects throughout the year.

Notable blockchain VCs particularly favored industry application projects, especially DeFi projects, collectively investing in 57 related projects throughout the year. They also showed enthusiasm for investing in exchanges and protocol projects, with a total of 24 and 11 related projects respectively.

In contrast, well-known traditional VCs had a more balanced investment layout, investing in 10 underlying technology projects, 10 industry application projects, and 8 cryptocurrency projects throughout the year.

Overall, in the DeFi sector, NGC Ventures invested in the most projects, totaling 11, followed by ParaFi Capital and Framework Ventures, which collectively invested in 8 projects. Among traditional investment institutions, only Winklevoss Capital, a16z, and Galaxy Digital invested in DeFi projects, while exchanges such as Coinbase, MXC, and Huobi also laid out DeFi projects.