Crypto investment declines for 5th consecutive quarter, no bottom found.

Crypto investment declines for 5th consecutive quarter, no bottom found.

The Decline of Crypto VC Investments: A Challenging Environment for the Blockchain Industry

Source: Adobe / LALAKA

Venture capital firms have been investing less money in the crypto sector, with a report from Galaxy Digital revealing a continued decline in investments over the past five quarters1. In the second quarter of this year, VC firms invested $2.3 billion in crypto and blockchain firms, a significant drop from the $8 billion invested in the same quarter of the previous year. This investment amount represents the low for the current cycle and is the lowest quarterly investment since Q4 of 20202.

During the peak of the current cycle, in Q1 2022, a staggering $13 billion was invested in crypto companies3. However, the latest data indicates that crypto VC investments have not yet reached their bottom for this cycle, even though spot Bitcoin (BTC) prices hit a low of just over $15k in November of the previous year4. Galaxy Digital, headed by renowned crypto bull Mike Novogratz, commented in their report that the environment for crypto VC fundraising remains “extremely challenging”5.

Despite the decline in the amount invested, deal activity in the sector has started to show signs of picking up. In the second quarter, 456 deals were completed in the crypto industry, an increase from 439 deals in the previous quarter6. This rise can be primarily attributed to the growth in the number of Series A funding deals, with 174 such deals completed in Q2 compared to 154 in Q17.

Source: Galaxy Digital

The United States continues to be the top country for crypto VC investment, with most venture capital funds raised during the quarter going to US-based companies8. Additionally, US firms were responsible for the highest number of completed deals, accounting for 45% of the VC money raised and 43% of the total number of deals completed9. Following the US, the UK, Singapore, and South Korea also stood out as active countries for crypto VC investing10.

Galaxy Digital concludes that the decline in crypto VC activity is not unique to the industry. The general headwinds faced by the VC industry, particularly due to higher interest rates, contribute to the challenges faced by venture investors in raising new funds in 202311.

In summary, the blockchain industry is currently experiencing a decline in VC investments, as reported by Galaxy Digital. This downward trend aligns with the challenging environment faced by the overall VC industry and is not solely specific to the crypto sector12. While investment amounts have decreased, there has been a slight increase in deal activity, with a rise in Series A funding deals13. The United States remains the dominant player in terms of both funds raised and completed deals, followed by the UK, Singapore, and South Korea14. Looking ahead, the blockchain industry will need to navigate these challenges and continue to innovate to attract further investment in the future.

  1. Source: Galaxy Digital↩︎

  2. Source: Galaxy Digital↩︎

  3. Source: Galaxy Digital↩︎

  4. Source: Galaxy Digital↩︎

  5. Source: Galaxy Digital↩︎

  6. Source: Galaxy Digital↩︎

  7. Source: Galaxy Digital↩︎

  8. Source: Galaxy Digital↩︎

  9. Source: Galaxy Digital↩︎

  10. Source: Galaxy Digital↩︎

  11. Source: Galaxy Digital↩︎

  12. Source: Galaxy Digital↩︎

  13. Source: Galaxy Digital↩︎

  14. Source: Galaxy Digital↩︎