The Scale of Cryptocurrency Venture Capital Investment Reduced by 68% in 2023, Leaving Only $10.7 Billion
According to The Block, the total investment amount for venture capital (VC) in the crypto industry in 2023 is only $10.7 billion, a 68% decrease from the previous year. They mainly focus on investing in seed and Series A startups, with a focus on NFT games and Web3 infrastructure.
2023 Venture Capital Investment Total Remains High
Key Areas: NFT, Web3 Games, Infrastructure
Institutions are preparing for 2024
Exchanges’ venture capital divisions: more focused on core business
The latest report from The Block Pro Research shows that the investment amount for crypto venture capital in 2023 has decreased by more than two-thirds compared to the previous year, dropping to $10.7 billion. The report suggests that this may be due to the aftermath of recent failed crypto projects and uncertainty in macroeconomics and regulatory direction.
Despite this, this year’s total crypto financing amount is still the third-highest in the history of the crypto industry, with the highest amount being $29 billion and $33.3 billion in 2021 and 2022, respectively.
Looking back at the bear market from 2019 to 2020, this year’s total investment amount also exceeds the total of approximately $6.3 billion at that time.
In terms of the timing of investments, most of the investment activities were concentrated in the first half of 2023, slightly declining in the second half, and then a surge of funds in November.
In terms of investment proportions, seed and Series A startups received larger investments in the early part of this year, but compared to last year, the investments decreased in the middle and later stages. This situation is similar to 2022.
In terms of investment areas, NFT, Web3 games, and blockchain infrastructure are the most favored areas by crypto venture capital, while projects related to data and transactions are relatively neglected.
In this regard, well-known venture capital firm Spartan has previously revealed several areas in the crypto industry that it will closely monitor next year. This includes 3A Web3 games, Bitcoin application construction, and modular blockchain infrastructure, which overlap with the aforementioned data to some extent.
Furthermore, the report also found that the number of projects invested by crypto venture capital has decreased this year. The total funding record is only 1,819, a 32% decrease from last year’s 2,671.
However, overall, the number of projects invested in 2023 is still higher than that 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 crypto market next year, coinciding with the influx of funds during the same period, due to the potential approval of the Bitcoin spot ETF in 2024, an imminent interest rate cut by the Federal Reserve, and the increasingly clear regulatory push.
Data from derivative exchanges Deribit and CME, including Bitfinex analysts, showed that institutional investors’ activity has increased since October this year, and the total open interest in contracts is approaching an all-time high. This may indicate that traditional financial institutions are also eager to join the market.
In response to Bloomberg’s inquiries about the current reduction in venture capital scale, venture capital departments of exchanges such as Kraken, Coinbase, and Binance have revealed their adjustments in investment strategies. These include raising billions of dollars in new funds (Kraken), shifting investments to more non-US projects (Coinbase), or prioritizing investments in startups with actual products or revenue (Binance).
Abhishek Saxena, the head of Polygon Ventures, also commented on this:
This financing winter is a healthy and necessary correction for the industry, refocusing on critical and prioritized businesses and projects.
VC
Venture Capital
Crypto Venture Capital
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