The central theses
- The cryptocurrency industry raised $2.1 billion in 297 funding rounds in the third quarter of 2023 – the lowest amount since the last quarter of 2020.
- Fundraising in the crypto industry peaked at more than $15 billion in the first quarter of 2022.
- The crypto industry sectors that saw the most fundraising activity in the third quarter of 2023 included blockchain infrastructure and decentralized finance (DeFi).
- Binance Labs was the most active investor last quarter, recording more than twice as many deals as its next closest competitor.
- Interest in cryptocurrencies has declined due to regulatory uncertainty and criminal charges against some of the biggest names of the last cryptocurrency bull market, such as Sam Bankman-Fried.
A report released on Thursday by crypto intelligence firm Messari showed a continued downward trend in crypto industry funding amid regulatory uncertainty in the US and the opening of criminal proceedings against FTX founder and former CEO Sam Bankman-Fried.
Although the price of Bitcoin has increased by more than 60% year-on-year, the 36% decline in fundraising in the crypto industry from the second quarter to the third quarter of 2023 is a clear sign that the crypto bear market is not over yet. It’s a continuation of a downward trend that began after a peak of more than $15 billion in donations in the first quarter of 2022.
The total amount raised last quarter was about $2.1 billion, the lowest since the fourth quarter of 2020, the Messari report said. Additionally, the 297 fundraising deals made in the crypto industry this quarter were the fewest since Q4 2020.
Blockchain infrastructure was the sector that received the most funding overall, accounting for 18% of the total, while the decentralized finance or DeFi sector saw the most activity with 67 deals closed.
More specifically, the proposed scaling solutions received 43% of the funds raised by blockchain infrastructure projects. In the DeFi sector, exchanges recorded both the largest number of deals and the most funds raised. Activity in these two sectors has been a trend over the past year, in addition to cash flows into the gaming and services sectors.
Binance Labs was the most active investor in the crypto industry in the third quarter of 2023 with 23 deals made. The focus of investments in the crypto industry is on DeFi, gaming and projects focused on zero-knowledge and privacy-oriented technologies.
Binance Labs accounted for more than twice as many deals as the next closest investor. However, the top 10 investors accounted for only 7% of all crypto industry fundraising deals last quarter, indicating a wide diversity in funding sources.
The crypto bear market loomed over Q3 fundraising
The reasons for the ongoing crypto bear market range from regulatory uncertainty in the US to a general decline in interest in the industry following the collapse of crypto exchange FTX and other platforms.
A number of major crypto exchanges and projects such as Binance and Coinbase have been the subject of lawsuits from the US Securities and Exchange Commission this year. The criminal trial against FTX founder Sam Bankman-Fried for fraud and conspiracy has now begun. At the same time, Congress is considering legislation with new regulations for the crypto industry.
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