Though the cryptocurrency market has undergone a massive bear market cycle, there are still hopes that the future in this sector is promising as Venture Capital firms have initiated deals of around $2.6 B in the first quarter of 2023. This amount was managed to be raised by crypto companies in 353 investment rounds.
Sharp Decline in the Raise of Capital
Though the figures seem promising, it does not mean that the scenario has improved. There has been a sharp decline resulting in around an 11% decrease in quarter-to-quarter value and around a 12% decline in total deals. This quarter has been the worst one to record the lowest capital invested after 2020. This makes it the fourth consecutive quarter to record declining trends in investment activities. All these data are given by Pitchbook which is a capital markets analytics company.
Regulatory Pressure: The Catalyst
These declining investments can be pointed to the lack of regulatory certainty in the crypto and digital assets sector. The recent disputes with FTX, Coinbase, and other companies have created a ripple effect. Many analysts believe that in 2023, central banks and regulators around the world may shift their focus on cryptocurrency and related assets to prevent something big like FTX collapse from happening in the future.
While declining investments may be a hot topic of discussion among crypto pundits, many people also believe that there may be some light at the end of the tunnel because layer-2 scaling solutions have picked up a very good momentum from 2022. Companies like Blockstream and Scroll have raised $125M and $50M in VC rounds.
Not just scaling solutions, companies that provide custody solutions like Taurus and Ledger have also raised quite a significant chunk amounting to $65M and $109M in a Series B funding round.
