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What Motivates Firms & Investors to Invest in a Bear Market?

  • The broader crypto market is experiencing massive losses in the past few days.

  • The sudden shift of power from retail investors to whales lead the market to a bearish trend.

  • Even in a bear market, retail and institutional investors are looking for opportunities to invest in crypto-related firms.


10 Nov 2022 By : Shubham Jangid
Southeast Asia’s Lar

As both traditional and crypto companies seek to strengthen their positions in the bear market, institutional capital continues to pour into the crypto industry.

While retail investors are dumping cryptocurrencies, institutional investors are flocking to the industry, seeing it as an opportunity to plan their digital asset strategy ahead of the next bull market. Two trends appear to be emerging-

  • An increase in crypto-focused venture capital investments,

  • Traditional asset managers providing institutional customers with access to crypto assets.

So, what motivates firms and investors to invest in blockchain and crypto companies even in a bear market? 

To understand this we will first cover some major fundraising rounds and later discover what opportunity brings investors to these funding rounds.

Companies & Firms That Raise Funds In Bear Market

In a relatively short period of time, the crypto ecosystem has grown by leaps and bounds, attracting a vast amount of venture capital and private equity. In its brief history, the space has shown a proclivity for innovation, particularly during difficult times. This also showcases projects with endurance and potential for growth.

As per reports, 40 big firms have invested in companies related to the blockchain/crypto market 2022.

Binance Labs, Binance's venture arm, announced in June that it had raised $500 million for its initial start-up fund, securing backing from DST Global and Breyer Capital, as well as undisclosed family offices and companies, making it this year’s largest fund-raising round.

In July, 5ire, an India-based blockchain firm, received a $100 million in Series A funding round led by Alphabit, Marshland Capital, Launchpool Labs, and Moonrock Capital, lifting it to unicorn status with a $1.5 billion valuation.

In September, Animoca Brands, the Hong Kong-based gaming software and venture capital firm behind The Sandbox, raised $75 million to extend its vision of an "open metaverse." The company is currently valued at $5.9 billion as a result of the funding round.

These are just a few of the major funding rounds that took place in 2022. Many funding rounds have already occurred this year, and it is believed that there will be plenty more in the last two months of 2022.

So, here's the million-dollar question, what motivates firms and investors to participate in funding rounds?

If we talk about market performance, the crypto industry is going through one of its worst periods.

During extreme bear market conditions, crypto prices have fallen by more than 60%, wiping out more than $1.5 trillion from the market.

For a variety of reasons, a bear market is ideal for both long-term and short-term investments. Despite the lack of liquidity, investors continue to fund early-stage startups whose products have real-world applications.

As a result, market segments that have the potential to expand in the coming years attract both investors and firms. One such segment is decentralized finance (DeFi), along with lending-borrowing, yield farming, derivatives trading, and other banking protocols.

Other areas that attract investors include NFT-based gaming ventures, payment platforms, and remittance protocols.

One more most potential area which is garnering investors' interest is Blockchain technology. In the past few months, blockchain has emerged as the most potent technology to change the lives of individuals and companies in general. It has various use cases in real-life like public procurement/ government contracting, land title registries, electronic voting, beneficial corporate ownership registries, grant disbursements, and many more.

This makes blockchain technology one of the most preferred investment options for both retail and institutional investors. Hence even in a bear market smart investors can contribute considerably to promising Web3 initiatives that will last in the long run.

What Lies Ahead? 

This bear market will end at some time, and we have no idea what technology or cryptocurrency will look like after the winter. But, for the time being, there are numerous grounds to believe that the growing pains we are experiencing will be worthwhile in the long run.

Is this an indication that much more funding from both retail and institutional investors is on the way? What are your thoughts on startups raising large sums of capital in funding rounds? Share your views in the comment section below.

Read also: What does the concentration of bitcoin holdings mean for retail investors?

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