Venture capital funding for companies in the cryptocurrency industry reached a total of $1.9 billion in the fourth quarter of 2023, showing a 2.5% increase from the previous quarter, according to a report by PitchBook. This marks the first time that venture capital investments in crypto startups have seen a rise since March 2022.
PitchBook’s report highlighted that the majority of funding in the crypto industry was focused on financial and technological solutions. This includes initiatives such as tokenizing real-world assets like real estate and stocks on the blockchain, as well as the development of decentralized computing infrastructure.
Notable fundraising efforts in the quarter included Swan Bitcoin and Blockchain.com, both of which secured $165 million and $100 million, respectively.
The most significant deal of the quarter involved a $225 million investment in Wormhole, an open-source blockchain development platform. Backed by Coinbase Ventures, Jump Trading, and ParaFi Capital, the company reached a valuation of $2.5 billion.
According to PitchBook, the increased interest in crypto from financial institutions can be attributed to the launch of the first spot Bitcoin exchange-traded funds (ETFs) in the United States in January.
In the first quarter of 2023, crypto firms secured $2.6 billion in 353 investment rounds, as stated in PitchBook’s Q1 Crypto Report. This represented an 11% decline in deal value compared to the previous quarter, as well as a 12.2% decrease in the total number of deals. Furthermore, this quarter marked the lowest level of capital investment in the crypto industry since 2020.
The crypto industry faced numerous challenges in 2022, with market difficulties leading to a decrease in venture capital funding for blockchain and crypto sectors. After reaching a peak of $11 billion and 692 deals in the first four months of 2022, VC investment steadily declined in the subsequent quarters.
Several factors contributed to the decrease in crypto and blockchain-related VC funding in 2022. This includes the collapse of the Terra ecosystem in May 2022, which resulted in the bankruptcy of cryptocurrency lending firms Three Arrows Capital and Celsius.
The FTX collapse in November 2022 further intensified market volatility, while broader global economic factors such as increased interest rates and inflation also played a role in the decline of venture capital investments.
However, in 2023, the crypto industry experienced a turnaround, with widespread adoption and the entry of major traditional financial institutions like BlackRock into the crypto space.