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Last year was a big year for crypto venture capital, despite multiple high-profile meltdowns and subsequent tsunamis of FUD (Fear, Uncertainty, Doubt). However, funds may not flow so easily this year, cryptocurrency researchers warn.
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, Galaxy’s head of corporate research, described 2021 as “the year of the monster,” as VC investment just hit $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.
If this trend continues, the cryptocurrency and Web3 companies may struggle to raise capital in 2023, Thorn suggested.
The macro, currency, and crypto-asset environment portends a difficult year for all involved.
He added that declining corporate valuations and tougher demands from investors would create a more difficult financing environment for entrepreneurs.
“Startups need to focus on fundamentals to contain operating costs and drive revenue in 2023,” 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 leading position provide good reason for US policymakers to clarify and codify the rules and regulations of emerging sectors.
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, the Global Venture Fund said he was down 35% from 2021, but the crypto sector has remained strong throughout his year, offering a ray of hope for next year.
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