Report: Crypto Investment Declines for Fifth Consecutive Quarter, Fails to Find Bottom

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July 17, 2023

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Venture capital firms are continuing to invest less money in the crypto sector, after five consecutive quarters of declines, according to a new report from crypto financial services firm Galaxy Digital.

During the second quarter of this year, VC firms invested $2.3 billion in crypto and blockchain firms, a sharp decline from the same quarter a year earlier when $8 billion was invested, the report said.

According to the firm, which is headed by the noted crypto bull Mike Novogratz, the investment amount marks the low for the current cycle, and is also the lowest amount that has been invested on a quarterly basis since Q4 of 2020.

At its peak this cycle – in Q1 2022 – $13 billion was invested into crypto companies.

The latest numbers show that crypto VC investments have not yet found a bottom for this cycle, despite spot Bitcoin (BTC) prices reaching a bottom of just over $15k in November last year.

Commenting on the outlook, Galaxy Digital wrote in the report that the environment for crypto VC fundraising remains “extremely challenging.”

Deal activity picking up

Despite a continued decline in the amount invested, however, deal activity in the sector has started to increase ever so slightly.

Over the course of the quarter, 456 deals were completed in crypto, up from 439 deals in the prior quarter.

The increase was mainly due to a rise in the number of Series A funding deals, with 174 such deals completed in the second quarter versus 154 in the first quarter.

US top country for crypto VC investment

As usual, most of the venture capital funds raised during the quarter went to companies headquartered in the US.

Similarly, US-based firms were also responsible for the highest number of completed deals.

The country accounted for 45% of the VC money raised, and 43% of the total number of deals completed.

Following the US, the UK, Singapore and South Korea also stood out as active countries for crypto VC investing.

Problems not unique to crypto

In conclusion, Galaxy noted that the declines in crypto VC activity are not unique to crypto given the general headwinds faced by the VC industry, particularly due to higher interest rates.

“When combined with the bear market in cryptoasset prices and the fact that many allocators feel burned after the spectacular blowups of several venture-backed companies in 2022, venture investors will continue to find it difficult to raise new funds in 2023,” the firm wrote.