According to a report from PitchBook, venture funding for companies in the crypto industry reached $1.9 billion in the fourth quarter of 2023, which represents a 2.5% increase from the previous quarter. This is the first time that venture capital investments in crypto startups have experienced growth since March 2022.
PitchBook’s report highlights that the majority of crypto ventures securing funding are focused on financial and technological solutions. This includes 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 fundraising activities in the fourth quarter included Swan Bitcoin and Blockchain.com, both of which secured $165 million and $100 million respectively for their crypto exchanges.
The most significant deal of the quarter was a $225 million investment in Wormhole, an open-source blockchain development platform. This investment, supported by Coinbase Ventures, Jump Trading, and ParaFi Capital, led to a valuation of $2.5 billion for the company.
PitchBook’s report attributes the increased interest in crypto from financial institutions 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 firms secured $2.6 billion in funding 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, and a 12.2% decrease in the total number of deals. Additionally, this quarter marked the lowest capital investment in the crypto space since 2020.
The crypto industry faced challenges in 2022, with market difficulties impacting venture capital funding for blockchain and crypto sectors. Following a peak of $11 billion and 692 deals in the first four months of 2022, VC investment steadily declined in subsequent quarters.
Multiple factors contributed to the decrease in crypto and blockchain-related VC funding in 2022, including 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 further intensified market volatility, and broader global economic factors such as increased interest rates and inflation also contributed to the decline in venture capital investments.
However, in 2023, the crypto industry experienced a turnaround, with increased adoption worldwide and the entrance of major traditional financial institutions like BlackRock into the crypto space.