A closer look at North America’s ‘disproportionate’ foray into crypto, blockchain
The last few years have seen many new blockchain-based startups emerge around the world. Some established ones like Coinbase have held fairly successful public offerings too. Consider this – The number of new entries to the industry this year has almost equaled the figures for the last two years combined.
Such growth across the blockchain industry has been geographically disproportionate, however. In fact, according to a recent report, most new companies have emerged from North America, namely the U.S and Canada.
A report published by Coinshares revealed that North America fares the highest in terms of the number of pure-play blockchain companies. The region accounts for 68% of all 57 publicly listed crypto-companies, with the USA having 25 such companies followed by Canada with 14.
With respect to value too, North America almost wholly dominated the total market share of these companies at 94%. While Canada had a market cap share of 13%, the U.S enjoyed an overwhelming 81% of the total share. This comes as no surprise since the continent’s most popular exchange, Coinbase, recently saw a successful IPO with leading firms like JP Morgan, Morgan Stanley now owning its shares.
The report also cited the “liquid nature” of the American market. Investors in the American market have a higher risk appetite and openness to novel technologies, thus leading to higher valuations. Interestingly though, the highest year-to-date earners were not exchanges, but mining companies.
Their aggregate market cap surged by 121% on the back of the larger crypto-market hike, along with the decline in Bitcoin mining hashrate due’s to China’s mining crackdown. This precipitated higher profits for the remaining miners. While crypto-financial services saw an increase of 105%, exchanges noted a “mere” 34% increase. This, despite their market cap being the highest among the others.
Moreover, since the financial service sector includes companies that manage and invest funds in cryptocurrencies, their growth of 105% was in line with the 111% price appreciation of Bitcoin. This sector includes companies such as Square and JP Morgan Chase, which are leaders in the financial sector.
Unsurprisingly, a correlation between cryptocurrency price spikes and new blockchain-focused businesses can be observed too, with the 2018 and 2021 bull runs coinciding with the heavy inflow of new companies. Ergo, their performance too is then determined by market movements, with those listed in 2021 far outperforming more vintage companies.
Nevertheless, investors have been equally enthusiastic about these new businesses. In fact, a recent KPMG report noted that institutional investments into blockchain have far surpassed inflows into cryptocurrencies. Here, investment activities include venture capitals, mergers, and acquisitions that are looking for promising fintech startups.
Moreover, top global banks like Barclays, Citigroup, Goldman Sachs, J.P. Morgan Chase, and BNP Paribas are also heavily investing in the ecosystem. Through both direct and indirect investments.
With companies such as Binance eyeing an IPO, direct investments into the blockchain industry will only grow from its figures of $98 billion.