The Reasons of Decreased Crypto Funding in Q4

2022 was a chaotic time for crypto funding due to bear markets and other chaos events. The crypto industry has not recovered from the collapse of Terra in Q2 2022 to the collapse of FTX in Q4. The effects of the bankruptcy of FTX in all industries affected many sectors, including leading companies. The affected areas include the funding of crypto venture capital. Blockdata analytics reported on the state of cryptography and venture capital funding in the fourth quarter of 2022. According to the report, venture capital funding has decreased in the cryptographic and blockchain sectors.

The Reasons of Decreased Crypto Funding in Q4

The Reasons of Decreased Crypto Funding in Q4

The Blockdata report noted that funding remained stagnant throughout 2022 following a thriving venture capital investment in the Web3 space in 2021. Blockdata analyzed data from CB Insights, a market intelligence platform that analyzes data points on venture capital, startups, and various sectors. In its analysis, Blockdata pointed out that in the fourth quarter (Q4), venture capital financing declined by 34% in 2022 compared to the third quarter (Q3). The last quarter saw a significant decline in crypto funding compared to the first (Q1) and second (Q2) quarters.

The Reasons of Decreased Crypto Funding in Q4

According to the Blockdata report, venture capital investment in crypto declined quarterly in 2022. The first quarter decreased by 53% from 2021, the second quarter by 67% , and the fourth quarter by 61%. The decline in venture capital investment has maintained a continuous pattern, falling from its historic high of $11 billion in funding and 692 transactions in the first four months of 2022.

In its report, Blockdata identified several factors that have led to the reduction in crypto funding over the past year. First, it cited the $60 billion collapse of the Terra ecosystem in May 2022 as a trigger for the decline. The collapse of Terra caused a cascade effect throughout the industry, which led to the bankruptcy of many crypto companies such as Celsius and Three Arrows Capital.

The FTX collapse of November 2022 was also one of the factors mentioned by Blockdata that contributed to the reduction in funding for blockchain and crypto VC. In addition, the liquidity crisis in FTX has triggered volatility in the cryptomarkets, and many assets have lost value and some companies have gone bankrupt.

Other Reasons of Decreased Crypto Funding

In addition, the macroeconomic situation in the world’s traditional financial markets and capital markets contributed to the decline in crypto funding. For example, the rise in interest rates and the US Fed’s inflation-control strategy are among the factors that have prevented venture capitalists from funding crypto- and blockchain-based startups.

The Reasons of Decreased Crypto Funding in Q4

Due to these factors, the budget for the fourth quarterof 2022 amounted to only $3.7billion, a decline of 61% compared to $9.6 billion for the fourth quarter of 2021. The overall blockchain and crypto startup funding saw an 11% yearly decline, dropping from $32 billion in 2021 to $29 billion in 2022.

However, Blockdata noted that in 2022, the number of investment transactions increased by 35% from 2021. This is a positive result in the context of the massive reduction in the funding reported. Furthermore, despite the decline in venture capital investment, investors are still interested in investing in blockchain technology.


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