Bulls, Bears and Crypto Unicorns

In finance, a unicorn is a privately held startup company with a valuation of 1 billion USD or more. The term was popularized five years ago by venture capitalist Aileen Lee, founder of CowboyVC, who wrote in a 2014 TechCrunch article:

Welcome to the Unicorn Club: Learning from Billion-Dollar Startups.

One of the world’s most well-known unicorns is Uber, the San Francisco-born ride-hailing service that gained a billion dollar valuation in just six years.

And now, we have unicorns in crypto, too.

Crypto unicorns: a new breed?

There’s a new beast in the forest: crypto unicorns. Since the explosion of cryptocurrencies in 2017 and 2018’s subsequent boom of ICOs (initial coin offerings), early-stage startup funding has seen a massive shift.

Between 2014 and 2017, the number of VC rounds in tech companies worldwide nearly halved. In 2017, ICOs raised 5.6 billion USD in funding compared to only 1 billion USD of traditional venture capital going to blockchain startups (TokenData, 2017).

Liquid’s path to unicorn status has similarly been dotted with both traditional VC funding and crowdsourced investment.

The company previously raised more than 20 million USD from venture funding, including leading Japanese investment firms such as JAFCO, SBI, B Dash Ventures, Mistletoe, and ULS Group. In 2017, Liquid raised more than 100m USD in what was Japan’s first regulated ICO.

Now in 2019, the first close of an ongoing Series C funding round has put the company at a valuation of more than 1 billion USD. Liquid joins the e-commerce company Mercari as Japan’s second unicorn.

There are currently more than 27 fintech unicorns worldwide and a number of them are in crypto, including Robinhood, Revolut, Coinbase and, now, Liquid.

Cryptocurrency platforms have become highly popular with some of the largest venture capital firms in the world. Does this wave of institutional investment mark a new trajectory for the development of cryptocurrency markets?

Bear-ing the scars of 2018

A number of important shifts occurred in the crypto space in 2018, thanks in part to the heavily bearish market and increased interest from regulators and institutions.

ICOs became IEOs (initial exchange offerings), Bitcoin shed more than 70% of its value, and the broader crypto market capitalization lost nearly 700 billion USD.

However, not all of 2018 was this gloomy. While the crypto community was doing some much-needed growing up, developments towards the end of 2018 pointed to a maturing market and positive institutional participation.

In early-2019, JPMorgan announced plans to launch JPM coin, Samsung confirmed the development of a crypto-wallet-supporting phone, Western Union teamed up with a blockchain startup to provide crypto wallet remittances in the Philippines, and even Facebook is now looking at the possibility of a stable coin.

If these developments tell us anything, it’s that even bearish markets can produce bullish prospects.

More magic to come

As the first quarter of 2019 draws to a close, it is impossible to predict where the market is headed next.

2018 was a valuable lesson that exuberance based on hype alone cannot be sustainable, but with more unicorns cropping up and a bull-run well overdue, the market looks set to undergo some serious technological, institutional and social development over the next 6 months.

It’s a jungle out there, but we’ve got our sights on an ocean of possibilities.

Image credit: sagesolar