Crypto venture capital funding saw a sliding trajectory even through the last quarter of 2023. Despite Bitcoin prices soaring during the period, investment in the crypto space took a fall. Bloomberg in its report highlights that the main reason behind the fall could be crypto venture capitalists not falling prey to the hype around the Bitcoin boom.
In its latest report, Galaxy Digital states that even though 2023 was a historic year for cryptocurrencies as BTC increased by over 160% and ETH by 90%, venture capital investment in cryptocurrency fell dramatically from 2022’s record-breaking year. Allocator demand for exposure was further diminished by multiple high-profile blowups of venture-backed cryptocurrency industry startups while tightening monetary policy raised the cost of capital and decreased venture allocations overall. In the end, 2023 concluded the year with a little over half of the agreements representing only one-third of the crypto venture capital investment that occurred in each of the previous two years.
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Bloomberg further highlights that from $38 billion in 2022 and more than $20 billion the year before, fundraising fell to $5.8 billion last year. The numbers demonstrate the importance of starting capital as well. By the end of 2023, venture capital firms focused on cryptocurrency had over $72 billion in assets under management, which accounted for more than half of all digital asset portfolios.
Startups developing Trading, Exchange, Investing, and Lending enterprises raised the most venture capital money (27% of the total) for the fourth consecutive quarter. For the first time, Wormhole’s $225 million fundraising effort led the Layer 2 & Interoperability category to raise the second-most capital (16%). With 12% of the cash raised, Web3 secured the third place. At approximately 3% of the total cash raised, the new AI category remained stable.
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