Venture capital funding for companies in the cryptocurrency industry reached a total of $1.9 billion in the fourth quarter of 2023, representing a 2.5% increase from the previous quarter, according to a report by PitchBook. This marks the first time that investments in crypto startups have seen a rise since March 2022.
PitchBook’s report highlights that the majority of funding in the crypto sector is focused on financial and technological solutions. These include initiatives such as tokenizing real-world assets like real estate and stocks on the blockchain, as well as the development of decentralized computing infrastructure.
Notable fundraises in the fourth quarter included Swan Bitcoin and Blockchain.com, which secured $165 million and $100 million, respectively.
The most significant deal of the quarter involved a $225 million investment in Wormhole, an open-source blockchain development platform. This investment, supported by Coinbase Ventures, Jump Trading, and ParaFi Capital, resulted in Wormhole being valued at $2.5 billion.
PitchBook’s report suggests that the increased interest in the crypto industry from financial institutions can be attributed to the launch of the first spot Bitcoin exchange-traded funds (ETFs) in the United States in January.
In the first quarter of 2023, crypto companies secured a total of $2.6 billion through 353 investment rounds, according to PitchBook’s Q1 Crypto Report. However, this represented an 11% decline in deal value compared to the previous quarter, as well as a 12.2% decrease in the total number of deals. Additionally, this marked the lowest capital investment in the crypto space since 2020.
The crypto industry faced challenges in 2022, with market difficulties leading to a reduction in venture capital funding for blockchain and crypto sectors. After reaching a peak of $11 billion and 692 deals in the first four months of 2022, VC investment steadily declined in subsequent quarters.
Several factors contributed to the decrease in crypto and blockchain-related VC funding in 2022. These included the collapse of the Terra ecosystem in May 2022, which resulted in the bankruptcy of cryptocurrency lending firms Three Arrows Capital and Celsius. The FTX collapse in November 2022 also intensified market volatility, while broader global economic factors like increased interest rates and inflation further contributed to the decline in venture capital investments.
However, in 2023, the crypto industry experienced a turnaround, with increased adoption worldwide and major traditional finance institutions like BlackRock entering the crypto space.