The year 2022 will be remembered as a tough one for cryptocurrencies because venture capital (VC) money stopped flowing into the blockchain and cryptocurrency industries. This was a sign of how bad the market was doing.
Blockdata did an analysis that showed that financing would keep going down every three months until the year 2022. This comes after a time when venture capital investments in the Web3 field as a whole grew until 2021.
Blockdata looked at the value of venture capital financing in the last quarter of 2022 and found that it had dropped by 34% from the previous quarter. The information was found on CB Insights. Compared to the first and second quarters of the year, the third quarter’s results were much worse, falling by 67% and 53%, respectively.
After the first four months of 2022, when investments reached a record high of $11 billion and 692 agreements, venture capital investments went down every quarter after that.
Blockdata points out a number of reasons why cryptocurrency and blockchain-related projects got less funding from venture capital in 2017. The collapse of the Terra ecosystem, which cost $60 billion and happened in May 2022, is known to have caused bitcoin lending companies Three Arrows Capital and Celsius to go out of business.
The implosion of FTX in November 2022 made the space even more unstable. Rising interest rates and inflation also had an effect on the global macro conditions of capital markets, which led venture capitalists to put less money into investments.
Because of this, venture capitalists only put in $3.7 billion during the fourth quarter of 2022. This is 61% less than what was given during the same time period in 2021, when $9.6 billion was given. The total amount of money that blockchain and cryptocurrency companies got in funding fell by 11% every year, from $32 billion to $29 billion, bringing the total to $29 billion.
Blockdata points out that the number of trades is expected to grow by 35% from 2021 to 2022. This is a good conclusion. The company says that venture capital spending has slowed down, but investors are still eager to put money into blockchain-based technology, apps, and businesses. Even though spending on venture capital has been going down, this is still the case.
The results of the study show that venture capital investments are slowly moving toward “non-volatile ideas.” Cross-chain bridges, payments and remittances, loans, decentralized autonomous organizations, asset management, and digital identity management are all examples of these innovations.
During the fourth quarter, there were a number of big investments made with venture capital. During a Series C round in December 2022, Amber Group was able to get the most money, which was $300 million. This was done to stop some goods from being taken off the market because of the FTX scandal.
During the fourth quarter, there were a total of nine “blockchain mega-rounds,” and each one brought in more than $100 million. During the fourth quarter of last year, only Uniswap and Celestia, with market values of $1.7 billion and $1 billion, were able to get the coveted “unicorn” title.
Coinbase Ventures is known as one of the most active corporate venture capital investors until 2022 because it has taken part in thirteen different fundraising rounds for blockchain and cryptocurrency businesses.
