Technology

The Future of Crypto According to KPMG: Maturity, Slowdown and Natural Selection

Is the age of reason coming soon? – KPMG is back in its latest report that the crypto market is becoming more and more mature. Indeed, even if investment falls, it remains above forecast expectations. KPMG is an Anglo-Dutch consulting and accounting firm that closely follows cryptocurrencies. Many articles and his closeness to ADAN (an association representing French crypto-active companies) may be indicative of this closeness.

$14.2 billion investment in the first quarter

Venture capital companies (VC) have invested up to $14.2 billion in cryptocurrencies, according to KPMG’s “Pulse Fintech H1’22” report released on Tuesday. So, in the first quarter of 2022, at least 725 transactions were made. The cryptocurrency market is becoming more and more mature, but investment is expected to decrease in the future.

The most important investments during this period were made in 4 large companies. In first place we find the German Trade Republic for $1.1 billion. Then we have the $550M digital asset storage platform Fireblocks. Third, the $500 million FTX cryptocurrency exchange. Finally, in fourth place we have the software company Ethereum Consensys.

KPMG Global Leader in FinTech Anton Ruddenklau and his team responsible for the report note that investment figures for the first quarter of 2022 are already more than double that of investments in the years to 2021. As such, the report highlights “the growing maturity of the space and breadth of technologies and solutions that attract investment.”

Total global investments (VC, PE and M&A) in payments 2019-2022 – KPMG

The face of investors in the sector is changing for the better. We are moving from retail investors to institutional players and corporations, which provide a growing share of capital inflows. As a result, crypto assets are beginning to resemble traditional assets, KPMG notes.

>> Don’t let the institutions get all the bitcoins back! Register on FTX reference crypto platform (commercial link)<

The current context that portends a fall in investment

Ruddenklau points out that this record investment of the previous year and this start of the semester should not continue. Indeed, this period of “end of affluence”, “obviousness” and “recklessness” – to boldly borrow the words of Emmanuel Macron – risks stalling investment.

To hilariously quote the woes that plague investor confidence, we have, according to the authors of the report, a looming potential recession, rising inflation, rising interest rates, and the Russian-Ukrainian conflict. We could even add successive deficits associated with pandemics and other climate events.

Firms offering cryptocurrencies and non-fungible tokens (NFTs) are particularly likely to experience a drop in investment, according to the report. However, the co-CEO of Blockchain & Cryptos at KPMG France Alexander Statchenko (who we recently interviewed) looks positively at this bear market:

“Some cryptocurrencies will disappear, especially those that do not have clear and reliable value propositions. In fact, it can be very beneficial from an ecosystem standpoint as it removes some of the confusion created by bull market euphoria. The best companies will be the ones that survive. »

According to him, some startups in the crypto universe will have to lower their valuation in order to continue raising funds and avoid extinction.

Blockchain & Cryptos co-director at KPMG France Alexander Statchenko positively assesses the bear marketAlexander Stashchenko predicts a fall in crypto investments

Still, he says, it is “the companies with the best governance, sound risk management policies, long-term vision and sound cost management approach” that will best survive in the current market. He adds that financial institutions are increasingly interested in blockchain infrastructure solutions and stablecoins. Their interest is to take advantage of the operational advantages of the technology and the distributed ledger.

Learn more about the future of the crypto market around the world.

KPMG also anticipates changes in underdeveloped markets such as Africa. This is evidenced by the efforts of Binance, which recently entered into preliminary negotiations with the Nigerian government. They want to create a favorable environment for cryptocurrencies in this country. This will aim to ensure long-term economic growth through digital innovation.

Nigeria-eNairaNigeria at the forefront of finance: Central Bank launches eNaira

The report also mentions bitcoin as legal tender in El Salvador and the Central African Republic. Therefore, there is growing interest in the sovereign use of cryptocurrencies, especially among developing countries that oppose traditional standards such as the US dollar. The phenomenon we talked about in the previous KPMG report.

Cryptocurrency trading is banned in China and India may follow suit. But other jurisdictions seem to favor the market while protecting the consumer. Let’s not forget that new rules for the cryptocurrency sector should appear in Europe at the end of 2022.

According to KPMG, the cryptocurrency market is becoming more and more mature, and investments are exceeding expectations. It remains to be seen which companies will survive and how long the bear market will last. In the meantime, we advise you to watch an interview with Claire Balva, co-director of the Blockchain & Cryptos sector with Alexander Statchenko.

When institutional investors focus on investments, interest in them is not useless either! In order not to miss this unique opportunity, register on the reference platform of the FTX crypto exchange without delay. In addition, you get a lifetime discount on trading fees (commercial link, see conditions on the official website).

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