The funding of cryptocurrency initiatives throughout time reveals a clear correlation with market circumstances. Given the unfavorable circumstances, this article demonstrates that project cash inflows fell precipitously in 2022. Can the year 2023, though, bring about a shift in the fortunes for these projects?
Crypto investment frequently makes the difference between a brilliant tech invention becoming a reality and an idea going nowhere. But who is starting those crucial conversations about cryptocurrency projects? The bulk of the time, cryptocurrency venture capitalists, or VCs, are the answer. The goal is to invest the money of their investors in the cryptocurrency markets and generate enormous profits.
These are the kinds of investors who wouldn’t blink at a $100,000 investment requirement. The finest exits and early-stage token investments have come from specific well-known individuals or the top VCs. The list of well-known companies in the cohort includes Andreessen Horowitz, also known as a16z, Pantera Capital, Coinbase Ventures, and others.
In light of recent market activity and sentiment, this money is also subject to some conditions. Similar to last year, the bitcoin market’s attitude and circumstances are still volatile.
For cryptocurrency operations and the involved companies, including retail, institutions, and others, last year was one of the most difficult journeys. Since the significant increase in 2021, the cryptocurrency market has lost over $2 trillion in value. The market was immediately impacted by a number of crashes, including the demise of the cryptocurrency exchange FTX, the Terra crash, and the mayhem brought on by Three Arrows Capital (3AC), among others. Even tarnish its credibility. Numerous hacking and illegal activity at this time only made matters worse.
Due to the necessity for further financing campaigns, last year’s expansion ambitions for some crypto projects were halted or hampered. According to the information that was made public, donations totaled over $21 billion, or $21,261,131,900, in 2017. Although this may seem like a large sum, the actual amount was less than $16 billion compared to the financing data in 2021. In all, financing projects fell by a staggering 42% over the two years as a result.
Zooming out farther, funding for 2022 decreased noticeably every quarter. After a strong fundraising performance in the last quarter of 2021, there was around $8.70 billion in the first quarter, a -41.8% QoQ decline. A comparatively modest fund influx into bitcoin startups was observed in the next quarters. At $6 billion in the second quarter (-32.0% QoQ) and $3.61 billion in the third quarter (-38.9% QoQ), firms raised increasingly less money. And finally, $3 billion (-17.1% QoQ) in the fourth quarter.
There were several advantages, especially as compared to the fundraising efforts in 2020 and 2019. Lim Yu Qian, a member of CoinGecko’s growth team put it:
“The relatively better funding performance in 2022 points to the cryptocurrency industry’s growth over the last five years, supported by more projects securing financial backing and increasing interest from institutional investors.”
Despite the difficulties faced by crypto projects in 2022, even the web3 initiatives could see the light at the end of the tunnel. In spite of the adverse market, web3 projects raised more than $7 billion, an increase of more than $4 billion, according to BeInCrypto. Web3 is starting to gain attention from investors, which explains why the fundraising activities last year.
The current year has just recently begun to bear the weight of the previous one. However, the buzz around web3 and the associated businesses might witness several landmarks. The head of research at the cryptocurrency investment business Galaxy Digital, Alex Thorn, reaffirmed the increase in financing for and even attention to web3 platforms. The seasoned expert predicted that the pattern from last year may hold true this year in an interview on January 10.
Nevertheless, a few initiatives did succeed in starting the year following receiving funding.
Yes, the start of the current year could have gone more quickly; nevertheless, some businesses did receive some much-needed infusions of capital to facilitate the operation. However, illegal activity can stop such incoming financial flows. In addition to this, regulation is another area of concern. A few nations, like Hong Kong and France, have already begun the year by taking actions to regulate the market. Then others would do the same.
These actions have led to the emergence of many narratives. In contrast, it can drive out undesirable characters from the blockchain industry. There are growing worries about this space’s dwindling decentralized nature as well, which may or may not affect investors’ bets on a particular project.