A report by KPMG showing the direction of the Fintech market highlights the changes in investments, losses and profits in the first half of 2022. One important aspect noted is the drastic changes being experienced in the cryptocurrency and blockchain industry.
It’s clear that with the bear market impact, money and investment are changing directions in the industry, but to what direction are they steering?
According to the report, investments in the blockchain and cryptocurrency market declined to $14.2 billion in H1’22 from 2021. Some of the reasons behind the fall included the Russia-Ukraine war, inflation, and the Terra collapse.
Terra collapse was one of many incidents that has greatly affected the industry. Others include protocol breaches and further impact of the Terra—UST crash which resulted in the loss of billions of dollars.
Before 2018, “most crypto investments came from retail consumers” according to KPMG but corporate organizations are taking the stage as they account “for a much larger share of investment”.
Countries and regions have also started taking steps towards regulating their cryptocurrencies with El Salvador and the Central African Republic making Bitcoin legal tenders for their respective nations. The EU was not left out as they “agreed to new regulations for the cryptocurrency industry,” in H1’22.
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Stablecoins, blockchain solutions, and compliance
Despite the threats in the Crypto market, the industry proves to be getting mature. The shift in focus of investment is one reason for this assertion.
Top VCs like Trade Republic, Fireblocks, FTX, and ConsenSys invested $1.1 billion, $550 million, $500 million, and $450 million respectively in this same “bearish” market in 2022. And the majority of these funds are focused on infrastructure.
While investments in cryptocurrencies are going down, “there will likely be a continued focus on the use of blockchain in financial market modernization”. Hence, the “money” is being diverted into creating real solutions around blockchain technology.
For the remaining part of 2022, the KPMG team foresees these trends:
- More financial tests with several crypto firms shutting down and fewer surviving.
- Introduction of products focused on “compliance and crypto transaction traceability”.
- Higher interest in stablecoins.
- Partnerships to drive ESG challenges.
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