VC Blockchain and Crypto Funding Fall in Q4 2022: Report
2022 will be a tough year for the cryptocurrency space, and gloomy market conditions were mirrored by a downward trend in venture capital funding flowing into blockchain and crypto activities.
A report from Blockdata highlights consecutive drops in funding through all four quarters of 2022, following booming venture capital funding into the wider Web3 space through 2021.
Analyzing data from CB Insights, Blockdata rounded out 2022’s final quarter of venture capital funding value with a 34% decline from Q3 2022. The year’s final quarter saw a drastic drop in funding value in contrast to Q1 and Q2, falling by 67% and 53% compared to the two quarters.
The subsequent drop in venture capital investment fell each quarter from an all-time high of $11 billion in investment from an accumulated 692 deals in the first four months of 2022.
Block data points to a number of factors for the decline in crypto and blockchain-related VC funding last year. The $60 billion collapse of the Terra ecosystem in May 2022 is highlighted as a triggering event, leading to the subsequent bankruptcy of cryptocurrency lending firms Three Arrows Capital and Celsius.
The implosion of FTX in November 2022 further affected the volatility in the space, while global macro conditions in capital markets affected by rising interest rates and inflation also played a role in the decline in investment by venture capitalists.
As a result, Q4 2022 saw only $3.7 billion in funding from VCs, which was a 61% drop from the $9.6 billion invested in venture capital invested in Q4 2021. The total funding received by blockchain and crypto -start-ups fell by 11% year-on-year. , down from $32 billion to $29 billion.
Related: Top Crypto Finance Stories in 2022
Blockdata highlights the volume of deals in 2022 increasing by 35% compared to 2021 as a positive takeaway. The firm suggests that despite a pullback in venture capital spending, investors are still looking to play blockchain-based technologies, applications and startups.
The report notes that venture capital investment is shifting towards ‘non-volatile innovations’, including cross-blockchain bridges, payments and remittances, lending, decentralized autonomous organizations, asset management and digital identity management.
Q4 still saw some significant VC investment. Amber Group received the highest amount of funding, raising $300 million in a Series C round in December 2022 to address withdrawals of specific products affected by the FTX debacle.
Nine ‘blockchain mega-rounds’ took place in Q4, with firms receiving more than $100 million in funding. Uniswap and Celestia were the only firms to reach unicorn status in the fourth quarter of last year, valued at $1.7 billion and $1 billion, respectively.
Coinbase Ventures was identified as one of the most active corporate VC investors through 2022, participating in 13 different funding rounds of blockchain and crypto startups.
Cointelegraph Research previously highlighted the drop in venture capital investment in blockchain and crypto firms in 2022. Web3 and infrastructure service providers received the highest share of VC funding according to internal research conducted.
