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Cryptocurrency venture capital investment declines to three-year lows amid ongoing market downturn.
Funding for startups within the cryptocurrency sector has reverted to levels seen in Q4 2020 due to the persistent bear market in cryptocurrencies.
As reported on October 5 by blockchain analytics company Messari, crypto startups secured a total of $2.1 billion through 297 deals in Q3 2023, representing a 36% decrease from the previous quarter and nearly a 70% drop compared to Q3 2022.
Seed funding emerged as the predominant category for fundraising, with $488 million raised across 98 deals. “Trends in deal counts indicate a notable transition away from later-stage projects towards early-stage initiatives over the past three years,” the researchers noted. Fewer than 1.4% of deals involved companies at the Series B stage or beyond.
Crypto VC funding has been declining since Q2 2022
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In contrast, strategic financing rounds have surged from 0.2% of the total deal share in Q4 2021 to over 22% currently. The largest private equity round during the quarter was a $200 million investment in UAE-based Islamic Coin from family office Alpha Blue Ocean’s ABO Digital. Messari remarked:
“Challenging market conditions are compelling projects to seek short-term bridge rounds or ultimately be acquired by larger entities.”
Despite the prevailing regulatory uncertainties, 54% of all active venture capital investors hailed from the U.S., surpassing the combined total from the rest of the globe. Investor interests have also shifted from user-facing applications to blockchain infrastructure, with the latter consistently outperforming the former in funding over the past three months.
“Nevertheless, this trend may not persist for long as an increasing number of investors are starting to recognize that without successful user-facing crypto applications, infrastructure investments are less likely to yield the expected returns,” the researchers stated.
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