There have been a lot of headlines on Blockchain and Cryptocurrency lately. Bitcoin’s price has been on a dive since January 2018. I took a few minutes the other day to take a look at the big picture.
What does the trajectory of investment and valuation for Blockchain and Cryptocurrency look like compared to another industry, say Social Media?
Most people would agree that blockchain has the potential to change the fundamentals of how finance and currency work. Both markets are massively bigger than media and advertising.
How do Blockchain & Cryptocurrency Compare to Social Media?
It has been seven years since the first major blockchain and cryptocurrency companies were founded. The first commercial Bitcoin transactions were conducted in 2010 and the first companies were founded the following year.
Companies in this space have had to face more regulatory hurdles than social media, which is only now beginning to face scrutiny from major governments over its business practices. The US Treasury department published guidelines for Bitcoin in 2013 that gave investors pause, and China spooked investors in 2017 when it clamped down on Bitcoin.
You can see this in the rate of investment when compared to an overlay of investment in the first seven years of social media:
Blockchain and Cryptocurrency have received relatively smaller investments from the VC community. (I admit that Crunchbase data over counts Social Media Investments as many companies retroactively tagged themselves as “Social Media”, but I’ve compensated some for that.)
In Social Media, the first IPO was Groupon in Year 8, and the first genuinely big IPO was Facebook in year 9. From there, investment and acquisitions began to decline.
So, we’re easily 2-3 years from the point at which Social Media peaked in IPOs and right around the peak in acquisitions.
Blockchain and Cryptocurrency companies still feel like Social Media’s MySpace and Friendster vs Facebook and Twitter.
- It is still early days for Blockchain and Cryptocurrency
- The industry has received no where near the level of investment that Social Media did for the same timeframe.
- Blockchain and Cryptocurrency have the potential to transform an industry that is much bigger than advertising, but more time is needed for the winners and losers to emerge.