VC Investment in Crypto Hits $2.49B as Expiry of Options Contracts Looms: Block to Reinvest Profits
Summary:
Venture capital investment into crypto startups rose to $2.49 billion in Q1 2024, a boost after three quarters of decline, according to Galaxy Research. In parallel, Bitcoin and Ether options contracts amounting to $2.4 billion are set to expire on May 3, implying potential market volatility. Jack Dorsey's Block, Inc. has pledged to re-invest 10% of its gross Bitcoin-related profits back into Bitcoin each month.
In the first three months of this year, there was a significant uptick in venture capital investment in cryptocurrency startups, ending a streak of three quarters of dwindling numbers. Approximately $2.4 billion worth of Bitcoin and Ether options are poised to expire on May 3, potentially stirring up turbulence in the market. In related news, Block has promised to reinvest 10% of its gross profit from its Bitcoin enterprise back into the digital currency every month.
Galaxy Research reports that cryptocurrency startups attracted $2.49 billion in investments from venture capitalist firms this January to March, marking a 29% surge. Overall, 603 deals garnered funding during this period. After witnessing a downward spiral for three consecutive quarters, this growth in startup capital is a much welcome development.
Diving into the demographics, 24% of the total raised capital was allotted to infrastructure startups, with EignLayer leading the pack with its $100 million funding round. Web3 companies positioned themselves at the head of the line, accounting for 31% of the total capital acquired.
Both Bitcoin and Ether options contracts, collectively valued at around $2.4 billion, are set to expire by May 3. This could potentially trigger an increase in market volatility. Investors have the permission to speculate on Bitcoin price fluctuations via the derivative contract known as a Bitcoin options contract without owning the Bitcoin itself. They can choose to buy a cryptocurrency at a specified price before a set date, known as call options, or sell a cryptocurrency at a determined price before the contract expires, known as put options.
The marketing data from the Deribit exchange suggests that there will be 23,367 Bitcoin contracts worth $1.39 billion set to expire on May 3. The put-to-call ratio for Bitcoin options contracts stands at 0.5, with a maximum pain point of $61,000. Moreover, Ether contracts amounting to 334,248 with a value of $1 billion are poised to expire by Friday. The put-to-call ratio for these contracts stands at 0.37, with a maximum pain point of $3,000. Historically, following the expiry of options contracts, there tends to be a short-term price volatility in the immediate cryptocurrency market, which has already been experiencing a bearish trend in recent weeks.
On a separate note, Twitter co-founder Jack Dorsey's fintech company, Block, Inc., has pledged to invest 10% of its gross profit from its Bitcoin operation into buying additional Bitcoin every month. Dorsey highlighted his company's pledge in a letter drafted to shareholders, provisions of which included promising first-quarter results. Block, Inc., has already acquired $220 million worth of BTC throughout the last quarter of 2020 and the first quarter of 2021. This investment strategy not only encompasses the realm of technology, but is also a strategic move towards a futuristic financial landscape that is all about economic empowerment.
Going by Block's gross profit from its Bitcoin operation through customer sales via its Cash App service (which reported a near 60% increase YoY, amounting to $80.1 million in the first quarter of the year) 10% of this amount could potentially purchase around 1,350 BTC at the current price of $59,250.
This report was contributed to by Geraint Price, Ana Paula Pereira, Sam Bourgi and Felix Ng.
Published At
5/3/2024 10:27:29 PM
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