Bitcoin Leads Crypto Market Recovery As Regulators Turn Up The Heat: Report

March has been a turbulent month for the crypto industry. Bitcoin (BTC) recorded its highest weekly close in 10 months, raising hopes among many that the bear market is over. One of the main drivers behind this expectation was a series of bank collapses in the US. This led investors to hope for falling interest rates later this year, despite Federal Reserve Chairman Jerome Powell’s insistence that lower rates were not part of the baseline scenario for 2023.

However, the optimism about the macro environment risks being offset by the regulatory crackdown on industry in the USA. This mixed environment is markedly different from the typical bull and bear market action that the crypto industry is used to and affects the different areas in different ways.

For those serious about understanding the various sectors of the crypto space, Cointelegraph Research publishes a monthly Investors Insights report that delves into venture capital, derivatives, decentralized finance (DeFi), regulation and much more. Compiled by leading experts on these various topics, the monthly reports are an invaluable tool to quickly get a sense of the current state of the blockchain industry.

Download and purchase this month’s Cointelegraph Research Terminal report.

VCs put off by looming stagflation

Investment activity in the blockchain industry saw a significant slowdown in March, according to the latest data from the Cointelegraph Research Venture Capital database, as only 59 individual deals took place, down from 96 in February. This represents a decrease of 38.5% in investment activity. Total aggregate capital inflows for March were $504 million, down more than 42.7% from February’s figure of $880 million.

VCs require stable and favorable macroeconomic conditions that can support the growth of high-risk ventures. The risk of a long-term stagflation environment makes this difficult to achieve, which is why VC investment sentiment has recently tended to be bearish. Until there is a shift in macroeconomic indicators that turns investors from risk-off to risk-on, there may continue to be stagnant or declining investment sentiment in the blockchain industry.

However, there were still some notable investment rounds in March, including $50 million for Ethereum layer-2 solution Scroll, $40 million for surveillance-free internet builder DAO tomi, and a $40 million seed round for CCP Games. Overall, the report rates investment sentiment for the blockchain industry as 3 out of 5, indicating that VC investment remains hampered by macro factors. However, VC activity is likely to be a lagging indicator in any future recovery.

Mining stocks ahead of the pack

Crypto stocks had a mixed performance in March. While mining boosted its share price due to higher revenues, other types of crypto ventures struggled. This included the likes of Coinbase, Canaan and Block. The latter’s price continued to be affected by the short-selling attack by Hindenburg Research.

On the mining front, the highest gains were recorded by Riot Platforms at 60%, Cipher Mining at 53% and Terwulf, which now runs a nuclear-powered mining facility that provides it with cheap electricity, at 47%. These top performers compare favorably with the MoM return on BTC of 23.0% and a 20.4% increase in mining revenue. Overall, however, crypto stocks still significantly underperformed Bitcoin.

The crypto industry is likely to operate in a more profitable environment with a more benign outlook for interest rates and reduced debt obligations for mining companies in the coming months.

Nevertheless, the macroeconomic outlook remains uncertain, with markets likely to continue a risk-off approach. With new information coming with Q1 2023 results, investors will be closely watching financial reports for any indication of strength or weakness in the crypto industry.

The Cointelegraph Research team

Cointelegraph’s research department consists of some of the best talent in the blockchain industry. Bringing together academic rigor and filtered through practical, hard-won experience, the researchers on the team are committed to bringing the most accurate, insightful content available on the market.

Demelza Hays, Ph.D., is the Director of Research at Cointelegraph. Hays has assembled a team of subject matter experts from finance, economics and technology to bring the premier source of industry reports and insightful analysis to the market. The team uses APIs from various sources to provide accurate, useful information and analysis.

With decades of combined experience in traditional finance, business, engineering, technology and research, the Cointelegraph Research team is perfectly positioned to put their combined talents to good use with the latest Investor Insights report.

The opinions expressed in this article are for general information purposes only and are not intended to provide specific advice or recommendations for any individual or about any specific security or investment product.