A total of 353 funding rounds fetched $2.6 billion (nearly Rs. 21,390 crore) towards start-ups working in the crypto sector in the first quarter of 2023, between January and March. Interestingly, the figures of both, the investment rounds and the capital raised, have shown a decline of 78 percent and 64.4 percent, respectively, from last year’s first quarter. This shows that the crypto sector still remains appealing enough for venture capitals to pour hefty finances in related companies, but the slowed-down second half of 2022 has affected incoming funding into the sector.
PitchBook, a finance-focussed research firm, in its recent report claimed that the first quarter of 2023 became the fourth consecutive quarter of declining investment activity. This essentially means that between April 2022 and March 2023, fundings directed towards crypto-related projects have remained low in comparison to previous years.
“After the collapse of FTX and a wobbly few months of fluctuating valuations, crypto has stabilised. But Q1 2023 also marked the lowest amount of capital invested in the vertical since Q4 2020,” the report said.
In the second half of 2022, over $200 billion (roughly Rs. 16,33,290 crore) was wiped off the global crypto market after promising projects like Terra and FTX collapsed due to liquidity crunches.
In the aftermath of these project downfalls, indirect impacts affected the traditional crypto-friendly banks in the US as well.
Since 2021, the valuation of the crypto sector has also fallen from its highest point of $3 trillion (roughly Rs. 2,46,86,250 crore) to its current capitalisation of $1.14 trillion (roughly Rs. 93,54,177 crore), as per CoinMarketCap.
The ups and downs in the crypto market, constant hack attacks and scam fears along with the lack of regulations to govern the sector are among major reasons why the industry lost its financial stronghold in recent years.
The 2023 Q1 investments have spiked by 33 percent in crypto startups as compared to the same month frame last year.
PitchBook’s report has highlighted that late rounds of investments grew by a whopping 209 percent between January and March this year, as compared to the same time last year.
“That number may be skewed due to a lack of disclosure on down rounds,” the report explained.
The chances of bagging an investment is still high for crypto firms, especially those working around privacy, data management, and security for Web3 protocols.
Several companies have launched investments pools in past months in order to incubate a lucrative crypto ecosystem.
Bitget, a Seychelles-based crypto exchange, for instance has decided to invest $100 million (roughly Rs. 819 crore) in promising Web3 initiatives emerging from Asian nations.
Companies like Solana, Binance, and Animoca among others are pouring heavy funding in Web3.