According to The Block, the total investment amount for venture capital (VC) in the cryptocurrency industry in 2023 is only $10.7 billion, a decrease of 68% compared to last year. They mainly focus on investing in seed and Series A startups, with a focus on NFT games and Web3 infrastructure.
The latest report from The Block Pro Research shows that the investment amount in cryptocurrency venture capital in 2023 has decreased by more than two-thirds compared to last year, falling to $10.7 billion. The report suggests that this may be due to the aftermath of recent failed cryptocurrency projects and uncertainty in macroeconomics and regulatory directions.
Despite this, the total funding amount for cryptocurrencies this year is still the third highest in the history of the cryptocurrency industry, with the highest amount being $29 billion and $33.3 billion in 2021 and 2022 respectively.
In comparison to the bear market of 2019 to 2020, the investment amount this year still exceeds the total of about $6.3 billion during that time.
In terms of time distribution, most of the investment activities were concentrated in the first half of 2023 and slightly declined in the second half, followed by a surge of funds in November.
Furthermore, in terms of investment sectors, the most favored areas by cryptocurrency venture capital are NFTs, Web3 games, and blockchain infrastructure, while projects related to data and transactions are relatively neglected.
In addition, the report also found that the number of projects invested by cryptocurrency venture capital has decreased this year. The total funding records were only 1,819, a 32% decrease compared to last year’s 2,671.
However, overall, the number of projects invested in 2023 is still higher than in 2020 and similar to the number in 2021.
Another report also pointed out that institutional investors seem to have already taken action and are preparing for the promising cryptocurrency market next year, coinciding with the period of influx of funds, due to the potential approval of the Bitcoin spot ETF in 2024, the imminent interest rate cut by the Federal Reserve, and the increasingly clear regulatory push.
Data from derivative exchanges Deribit and CME shows that institutional investors’ activities have increased since October, with the total open interest of contracts approaching the all-time high, indicating that several traditional financial institutions are also preparing to join the market.
In response to the shrinking venture capital scale, venture capital departments of exchanges Kraken, Coinbase, and Binance have revealed adjustments in their investment strategies when faced with inquiries from Bloomberg. These adjustments include raising new funds worth hundreds of millions of dollars (Kraken), shifting investment focus to non-U.S. projects (Coinbase), and prioritizing investments in startups with actual products or revenue (Binance).
Abhishek Saxena, the head of Polygon Ventures, also commented on this:
“This funding winter is a healthy and necessary correction for the industry, allowing it to refocus on key and priority businesses and projects.”
VC, venture capital, cryptocurrency venture capital