Funding for crypto and blockchain startups drops

Crypto and blockchain startups experienced a significant decline in investment during the second quarter of 2023, according to a recent report by Galaxy Digital, a crypto investment firm.
Bitcoin exchangeThe report revealed that the sector attracted a total of $2.32 billion in funding during this period, marking the lowest investment level since the fourth quarter of 2020. This downward trend follows a peak of $13 billion in the first quarter of 2022.

In Q2 2023, the report highlighted that only $720 million was raised by ten new crypto venture capital (VC) funds, representing the lowest amount since the third quarter of 2020, which coincided with the start of the Covid-19 pandemic. It was also noted that companies founded in 2021 and 2022 accounted for the majority of venture deals completed during this period.

The United States emerged as the dominant player in both the number of deals completed and the amount of money raised. US-based companies secured 45 percent of all crypto VC funding in Q2 2023, followed by the UK with 7.7 percent, Singapore with 5.7 percent, and South Korea with 5.4 percent. Similarly, in terms of deals completed, US-based companies took the lead with 43 percent, followed by Singapore and the UK with 7.5 percent each, and South Korea with 3.1 percent.

The report also outlined the sectors within the crypto and blockchain industry that attracted the most venture capital. Trading, exchange, investing, and lending startups raised the highest amount, totaling $473 million, accounting for 20 percent of the deployed capital. Web3, NFTs, gaming, DAOs, and metaverse startups secured the second-largest capital amount, raising $442 million, representing 19 percent of all venture capital invested in the second quarter.

In terms of deal count, companies focusing on Web3 gaming, NFTs, DAOs, and the metaverse remained in the top position, followed by trading, exchange, investing, and lending firms. Regarding the stage of investment, mining and Layer 1 deals were mostly in the later stages, while custody, media/education, compliance, and DeFi attracted significant portions of funding at earlier stages.

Overall, the second quarter of 2023 saw a decline in investment in the crypto and blockchain sector, signaling a continuation of the downward trend that began after a peak in early 2022. The report shed light on the dominance of US-based companies in both deal completion and funding, while highlighting the sectors that attracted the most venture capital during this period.

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