As the cryptocurrency market continues to navigate turbulent waters, the industry experiences its own Ocean’s waves – of venture capital (VC) funding. According to blockchain analytics firm Messari, VC funding for crypto startups has plunged to a shocking three-year low, mirroring the market conditions of Q4 2020.
In Q3 2023, a total of $2.1 billion across 297 deals were raised, a dip of 36% from the previous quarter and nearly 70% from Q3 2022. Start-ups often rely upon seed funding, and in this case, $488 million was raised over 98 deals, marking it as the largest fundraising category. However, the data also reveals a significant shift away from later-stage projects and into early-stage ventures over the past three years. Only a minuscule 1.4% of deals involved companies at the Series B round or beyond.
Interestingly, amid this journey on stony roads, crypto VC funding has been on a steady decline since Q2 2022. Nonetheless, strategic financing rounds shot up from occupying merely 0.2% of total deal share in Q4 2021 to now standing at over 22%. Illustrating this, the report highlights a substantial $200 million investment into UAE-based Islamic Coin from family office Alpha Blue Ocean’s ABO Digital.
This lean funding period arrives with its own implications. The report suggests that harsh market conditions are compelling projects to raise short-term bridge rounds or ultimately get acquired by larger projects. Even so, despite regulatory uncertainties, 54% of all active VC investors were from the U.S., more than the rest of the world combined.
In terms of investment preferences, again a dynamic shift is noted from user-facing applications towards blockchain infrastructure. However, this trend could be fleeting as investors may soon realize that infrastructure investments are less likely to generate their desired returns without successful user-facing crypto applications.
On the other side of the coin, it’s worth noting that changes in market patterns can often signal opportunities for adaptation and innovation in the industry. As start-ups and investors navigate this uncertain ecosystem, the survival of the fittest will certainly play out, with resilience, agility and innovation taking the center stage. For the crypto industry, the tide has ebbed, but the question remains: who will ride the wave when it returns? Meanwhile, keeping an eye on the market trends could provide clues to what the future holds for the crypto industry.
Source: Cointelegraph
