Early-stage startup deals are rising, while funding for mid/later phases is declining reflecting a shift towards nurturing crypto ventures.
In 2023, there was a notable transformation in cryptocurrency investments as crypto venture capital (VC) funding experienced a significant decline of 68%, dropping from the $33.3 billion invested in 2022 to $10.7 billion.
Despite this decrease, 2023 remains the third-highest year in total crypto investments, surpassing the figures during the previous bear markets of 2019 and 2020.
Crypto Investment Trends of 2023
Most of the investments occurred in the year’s first half, with a noticeable dip in the second. However, November witnessed a slight uptick, hinting at a potential revival of investor interest.
The shift in investment stages was another highlight of 2023. There was a marked increase in the deals allocated to pre-seed, seed, and Series A startups.
In contrast, mid and later-stage startup funding dwindled, reflecting a strategic shift towards nurturing new and emerging ventures in the crypto space.
Regarding sectors within the crypto industry, NFT/gaming, infrastructure, and Web3 led in deal count. Other sectors, like data analytics, trading platforms, and enterprise solutions, saw reduced investment deals.
Despite the total investment in 2023 being notably lower than the peak of 2022, it still exceeded the $6.4 billion seen in the 2019-2020 bear market.
This signifies a maturing market that, despite encountering challenges, still attracts significant investments.
The number of crypto VC deals declined by 32% in 2023, with 1,819 deals compared to 2,671 in 2022. The deal count remained consistently higher than the monthly deals in 2020 and was close to the number in 2021.
Crypto’s 2023 Funding Drop Spurs Industry Refocus
“The significant drop in crypto funding in 2023 was largely expected given the macroeconomic environment, regulatory uncertainty, and the scars left by recent major crypto failures,” said Abhishek Saxena, principal lead at Polygon Ventures.
He added, “This funding winter served as a healthy and necessary correction, enabling the industry to refocus on critical priorities.”
2023’s investment landscape in crypto reflects a broader trend of cautious optimism and strategic reorientation.
Investors focus more on early-stage startups, signaling a belief in the long-term potential of blockchain and crypto technologies despite the short-term challenges and market corrections.
Looking forward, venture capitalists in the cryptocurrency sector anticipate an increase in investments and transactions in 2024, in line with recent price changes and anticipated upward trends in the cryptocurrency markets.
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