During the year 2023, venture capital (VC) funding for cryptocurrency projects experienced a significant decline of 68%, reaching the figure of $10.7 billion compared to the $33.3 billion investment recorded in 2022. Although this drop was substantial, the total amount invested during the year still surpassed previous bear market periods, highlighting the resilience of the sector.
The investment pattern throughout the year revealed that the majority of capital injections took place in the first half of the year, experiencing a decline in the second half. However, November stood out as a month where a resurgence in funding was observed, suggesting dynamism in the market despite the overall trend.
Regarding the distribution by stages, a notable shift was evident. Investments were directed more towards early-stage startups such as pre-seed, seed, and Series A, while investments in mid and late stages showed a decrease compared to the previous year. This change in investment preferences could indicate a greater focus on emerging and innovative projects.
An Upsurge in Crypto Investments is Expected in 2024
Vertical analysis reveals that, despite the overall decrease, certain sectors maintained their dominance. NFT/gaming, infrastructure, and web3 areas stood out in terms of the number of deals, while other categories such as data, trading, and enterprises experienced a decline in the number of investments.
Experts in the field, such as Abhishek Saxena from Polygon Ventures, pointed out that the significant decrease in funding in 2023 was expected due to the macroeconomic environment, regulatory uncertainty, and the lessons learned from major crypto failures. However, the intensity of this “funding winter” surprised many investors and entrepreneurs, who consider this correction to be healthy and necessary to refocus industry priorities.
Despite the slowdown, the year 2023 ranked as the third-highest in terms of total investment, although significantly below the unprecedented levels reached in 2022, which was the highest year for VC investment in cryptocurrencies to date. Nevertheless, the sector demonstrates resilience and optimistic expectations for the future as VCs anticipate a resurgence in funding and deals in the year 2024, aligning with recent changes in prices and anticipated bullish trends in cryptocurrency markets.
