2022 will be a difficult year for cryptocurrencies, and grim market conditions have been reflected in a decline in venture capital (VC) funds flowing into the blockchain and cryptocurrency sectors.
A Blockdata report highlights consecutive quarterly declines in funding through 2022, following the boom in VC funding in the broader Web3 space through 2021.
Analyzing data from CB Insights, Blockdata rounded up the last quarter of 2022 of the value of VC funding and saw a 34% decline from the third quarter of 2022. The last quarter of the year was down sharply compared to the last quarter. first and second quarters, falling 67% and 53%. respectively.
The subsequent drop in VC investment fell every quarter from an all-time high of $11 billion in investments and 692 deals in the first four months of 2022.
Blockdata points to several factors for the decline in cryptocurrency and blockchain-related VC funding last year. The $60 billion collapse of the Terra ecosystem in May 2022 stands out as a triggering event, leading to the subsequent bankruptcy of cryptocurrency lending firms Three Arrows Capital and Celsius.
The FTX implosion in November 2022 further affected volatility in the space, while global macro conditions in capital markets affected by rising interest rates and inflation also played a role in declining investments. of venture capitalists.
As a result, the fourth quarter of 2022 saw just $3.7 billion in venture capital funding, a 61% drop from $9.6 billion in the fourth quarter of 2021. Total funding for new Blockchain and crypto companies decreased 11% annually, from $32 billion to $29 billion.
Related: Top Crypto Funding Stories of 2022
Blockdata highlights the increase in transaction volume in 2022 by 35% compared to 2021 as a positive conclusion. The firm suggests that despite a pullback in venture capital spending, investors are still looking to fund blockchain-based technologies, applications, and startups.
The report notes that venture capital investments are shifting into “nonvolatile innovations,” including cross-chain bridging, payments and remittances, lending, decentralized autonomous organizations, asset management, and digital identity management.
The fourth quarter still produced some sizeable venture capital investments. Amber Group secured the most funding, raising $300 million in a Series C round in December 2022 to address reductions in specific products affected by the FTX debacle.
Nine “blockchain mega-rounds” occurred in the fourth quarter, where companies raised more than $100 million in funding. Uniswap and Celestia were the only companies to achieve unicorn status in the fourth quarter of last year, worth $1.7 billion and $1 billion, respectively.
Coinbase Ventures was identified as one of the most active corporate venture capital investors through 2022, participating in 13 different funding rounds of blockchain and cryptocurrency startups.
