When the price of bitcoin and other cryptocurrencies fell sharply from their late-2017 peaks last year, venture capitalists and other investors switched their attention to the promise of their underlying technology, the ledger known as blockchain.

For a while, blockchain was widely regarded as a smarter bet for investors, but that situation has reversed in the first half of 2019. Bitcoin’s price has rebounded since January, while the flow of cash into blockchain start-ups has fallen sharply.

According to data from CB Insights, a private market data and predictive analytics firm, traditional venture capital investments in blockchain companies since the start of 2019 have totalled US$784 million via 227 deals. If that slower pace is maintained, businesses focusing on that technology may only draw $1.6 billion this year, down by around 60% from a record $4.1 billion in 2018, the firm said.

A steep decline

Money for blockchain projects coming from corporations is on “an even sharper decline,” despite interest from companies such as Facebook in creating their own digital coins, CB Insights said. Maturing start-ups are drawing less support, while young start-ups are faring better, it added.

“It took a little bit for the enthusiasm to wear off,” CB Insights’ CEO, Nicholas Pappageorge, observed on the state of the blockchain investment market.

The data also showed that over the five years to July 2019, 40% of blockchain investment was derived from the US, with China a distant second accounting for 15% of the total.

The trends have significant implications for Silicon Valley and Wall Street, because US blockchain start-ups have been the biggest recipients of venture capital since 2014, the firm reports.

A separate study, highlighted in a Reuters report, found that even blockchain projects that had gained funding, for example those spearheaded by banks, had less than optimal success rates.

Out of 33 such projects, only 12 had made significant progress since their inception. A New York Times article commented that these were “bad signs for the blockchains not Bitcoin crowd”.

The data suggests a definitive shift in investor interest away from blockchain and towards Bitcoin itself as a source of returns for smart money. The price of bitcoin was down by more than 70% last year, but in H1 2019 it regained much of the lost ground, more than tripling to almost $13,000 by late June before retreating below $10,000.

In recent days, US president Donald Trump, members of his administration and Congress have criticised Facebook’s plans and cfor its own currency, Libra, and cryptocurrencies generally, expressing concern they may be used by criminals or terrorists.