How to Get Crypto Funding For Your Startup

Sooner or later, every business reaches a point where it needs to raise funds for further development. The crypto industry is no exception.

The good news is, the crypto funding offers more options than ever for raising money. Let’s take a look at some creative ways to fund your blockchain project.

Start with Your Own Money

When you’re launching a crypto startup, it requires considerable capital to cover a variety of expenses. These include purchasing servers and software, hiring specialists for the business, renting office space, and more.

Some startups also use an ICO to raise funds for their business. This method involves offering new investors a chance to buy tokens that can be used to trade on the platform. The ICO is often managed by a crypto exchange.

Nonprofit development teams might not have made crypto a priority fundraising strategy in the past, but this growing segment of wealthy, younger donors could be interested in giving to their favorite causes with cryptocurrency. However, these gifts may be more difficult to steward than those of cash. Due to market volatility, donations in crypto can shrink or grow substantially before being converted back to cash. This makes it important for nonprofits to create clear acceptance policies similar to those they would use when accepting gifts of stock.

Look for Lenders or Investors

Crypto lending platforms allow you to borrow funds by pledging cryptocurrency assets as collateral. Most lenders require a minimum percentage of the value of the asset, known as the loan-to-value (LTV) ratio, and some limit the number of cryptos you can use to secure a given amount.

Most of these services offer interest rates that are much higher than what you’ll find in a traditional savings account, but they also come with some risks. For example, the assets you pledge to secure a loan aren’t FDIC-insured, so if the platform goes under, you could lose your investment.

You can minimize your risk by researching platforms carefully, and making sure you understand how they vet borrowers and protect their investors’ investments. You should also compare repayment terms, funding times and interest rates before choosing a lender.

Submit a Proposal

When most people think of crypto funding, they think of venture capital investment. But this is not the only way to get the funds you need for your blockchain startup. For example, you could also start a crowdsale or DAO to raise money for your project.

This type of crowdfunding allows individuals to contribute small amounts of money in exchange for crypto tokens that they will hold and be able to redeem for cash later on. This is a more flexible option than seeking out traditional investment from banks and other institutions.

The spectacular, if volatile, growth of crypto markets has led to increased efforts to regulate the space. A regulatory fabric is being woven, but some fear that this will stifle innovation and slow the industry's growth. Moreover, recent bankruptcies of digital-asset issuers and exchanges, such as Celsius and Voyager, have added to the growing anxiety about regulation. The SEC's proposed rules, if adopted, would be intended to address these concerns.

Stay on Track

For many investors, crypto-based investments are a way to diversify their portfolios. While these assets are volatile, they are seen as less risky than stocks and bonds. In addition, they can be transferred quickly and easily without the need for a bank that might block the transaction or charge a fee.

To their proponents, cryptocurrencies empower people to take control of their money and escape the grip of central banks and Wall Street. Critics, however, argue that cryptocurrencies are used to finance terrorist organizations, evade sanctions, and stoke inequality.

Funding rates are periodic payments between traders that help nudge the perpetual rate for futures contracts closer to the spot price of a specific crypto. They also incentivize traders to align their positions with the prevailing market sentiment, by rewarding them for activity that narrows the differential between perpetual futures contract prices and underlying market prices. Amberdata normalizes funding rate data for each exchange and its respective funding interval, which is usually eight hours.