2022 has been a big year for crypto venture capital despite multiple high-profile meltdowns and subsequent tidal waves of FUD (Fear, Uncertainty and Doubt). It may not, warns cryptocurrency researchers.
According to Galaxy Research, in 2022, the number and value of deals invested in Web3 and cryptocurrency startups by venture firms will be just over $30 billion.
Alex Thorn, head of Firmwide Research, described 2021 as “the year of the monster,” with VC investment just hitting $31 billion.
However, in a Jan. 5 report, Thorn said that macroeconomic and crypto market conditions led to a significant drop in investment in the third and fourth quarters. This could continue until 2023 until macro and crypto market conditions improve.
Thorn noted that there were 2,900 venture deals in 2022, but the fourth quarter had the fewest deals and lowest investment in two years.
More than $30 billion invested in cryptocurrency startups in 2900 deals by venture investors in 2022. This was a very questionable year where he was only beaten by 2021. pic.twitter.com/khduDKDZhd
— Alex Thorne (@intangiblecoins) January 5, 2023
If this trend continues, the cryptocurrency and Web3 companies may struggle to raise capital in 2023, Thorn suggested.
“The macro, currency and crypto environment portends a difficult year for all concerned.”
He added that declining corporate valuations and tougher demands from investors would create a more difficult financing environment for entrepreneurs.
“Startups will need to laser on fundamentals in 2023 to keep operating costs down and generate revenue,” he continued.
The US regulatory environment will also have an impact, as the US still dominates the crypto startup ecosystem.
More than 40% of all crypto venture capital deals last year involved US-based startups, according to the report.
“The continued importance of the United States to these markets and its leadership position provide good reason for US policymakers to clarify and codify the rules and regulations of emerging sectors.”
Related: Investors Chase Web3 As Blockchain Industry Builds Despite Bear Market
However, investor trends and the cryptocurrency market are cyclical.
Gene Frantz, general partner of Google and Alphabet’s independent growth fund CapitalG, told Forbes last month that the outlook and headlines for the end of 2023 will be much better than they are today.
“The current news cycle may be rough, but sustainability and innovation, combined with an improving economic outlook, will restore the optimism that has always defined us. [venture capital] industry. “
Crunchbase also hinted in a Jan. 5 report that 2023 venture funding will slow across all sectors. In 2022, global venture capital fell by 35% from 2021, but the crypto sector remains strong this year, offering a glimmer of hope for next year.
