VCs put $14.2 billion into crypto in the first half of 2022, but investments are now slowing
Venture capital firms poured $14.2 billion into crypto across 725 deals in the first half of 2022, but Big Four accounting firm KPMG predicts investment is likely to slow for the rest of the year.
According to a newly released KPMG report on Tuesday, the biggest investments in H1 2022 came from Germany-based crypto trading platform Trade Republic ($1.1 billion), digital asset platform Fireblocks ($550 million), crypto exchange FTX ($500 million), and Ethereum software company ConsenSys ($450 million).
The authors of the report, including KPMG’s global head of fintech, Anton Ruddenklau, noted that investment figures for the first half of 2022 alone were more than double all years prior to 2021, which “highlights the increasing maturity of the space and the breadth of technologies and solutions that attract investments.”
However, Ruddenklau said overinvestment in the record 2021 and first half of 2022, along with a looming potential recession, rising inflation, interest rates and the Russia-Ukraine conflict, will lead to a drop in investment this year.
KPMG’s prediction of a slowdown in crypto investment appears to have been confirmed already in data from July, with monthly inflows into the blockchain venture capital market falling 43% on the month, according to Cointelegraph Research.
Ruddenklau expects the decline in crypto interest and investment to be particularly felt in retail businesses offering coins, tokens and non-fungible tokens (NFTs).
Alexandre Stachtchenko, director of blockchain and crypto assets at KPMG France, stated in the report that “well-managed crypto companies with sound risk management policies, long-term vision and strong cost and risk management approach” will best position themselves to survive the current bear market:
“Of course, some cryptos will die out – especially those that don’t have clear and strong value propositions. That can actually be quite healthy from an ecosystem point of view because it will remove some of the clutter that was created in the euphoria of a bull market. The best companies will be those that survives.”
Stachtchenko added that financial institutions have become increasingly interested in blockchain infrastructure solutions and stablecoins to leverage the operational benefits of distributed ledger technology.
Related: Venture Capital Funding: A Beginner’s Guide to VC Funding in the Crypto Space
KPMG also expects further investment efforts in underdeveloped fintech markets, particularly in Africa.
Efforts on this front have been made by crypto exchange Binance, which recently entered into early talks with the Nigerian government to build a crypto-friendly economic zone with the aim of generating long-term economic growth through digital innovation.
