Due to the lack of regulatory clarity, the cryptocurrency industry has been facing a difficult period, causing venture capital (VC) deals with crypto companies to decline for the fourth consecutive quarter. According to research by PitchBook, global VC investment in crypto companies during the first quarter of 2023 amounted to $2.6 billion, representing an 11% drop in quarter-on-quarter (QoQ) deal value. Additionally, the number of investment rounds decreased by 12.2% to 353, the lowest since Q4 2020.
The report attributes the decline in VC investments to the lack of regulatory clarity, failed crypto companies in 2022, and uncertain practical benefits in experimental projects. The lack of clear regulations is a major concern for the industry and a limiting factor for mainstream adoption of cryptocurrencies. Furthermore, governmental regulators, particularly in the US, tend to be reactive instead of proactive, making it difficult for the industry to predict future regulations.
However, analysts predict that 2023 could be a turning point for the industry, with financial regulators and central banks worldwide increasing their focus on crypto assets and writing new rules to prevent potential collapses like FTX. The authors believe that better regulations and guidelines will pave the way for mainstream adoption of cryptocurrencies.
On the other hand, a study by Clarify Capital revealed that 52% of investors surveyed during 2022 plan to avoid buying digital assets in 2023. This may be due to the industry’s uncertainty and the recent decline in VC investments. However, it is important to note that investing in cryptocurrencies can still be profitable for those willing to take risks and do their due diligence.
In conclusion, the decline in VC investments in crypto companies highlights the need for clearer regulations and guidelines in the industry. While the lack of regulatory clarity may have contributed to the decline, it is important to note that the potential benefits of cryptocurrencies cannot be ignored. With financial regulators and central banks expected to focus more on crypto assets in 2023, the industry may experience a policy inflection point that could pave the way for mainstream adoption.
