Crypto VC Funding Hits 2-year Low, US Firms Still: Galaxy Research

According to a new report, venture capitalist (VC) investment in crypto enterprises continued to dip in the first quarter of 2023, but despite the present legal instability for crypto in the United States, it is still first in terms of the number of firms raising funds.

According to an April 11 study from Galaxy Research, the research arm of crypto investment firm Galaxy Digital, the $2.4 billion invested by VCs during the first quarter of 2023 was the lowest amount invested since the fourth quarter of 2020.

Since peaking at nearly $13 billion in Q1 2022, VC investments have been declining, with the latest quarter’s statistics showing a drop of more than 80% compared to the same period last year. According to the study, data on venture deals is frequently disclosed at a later date, thus the $2.4 billion amount may be amended in the future.

While capital investment has decreased since Q4 2022, the number of transactions has climbed by about 20%, according to the study, and an apparent association between crypto prices and capital invested could see VC activity resume following big price rises late in the first quarter.

While various statistics and anecdotal evidence suggest that crypto firms are leaving the United States in search of greener pastures, citing factors such as regulatory clarity and friendlier tax policies, Galaxy discovered that U.S.-based companies raised 42.8% of the VC money flowing into crypto in Q1 2023, with France coming in second at 19.4%.

While Galaxy’s research has listed investment jurisdictions since the third quarter of 2022, the United States’ proportion of crypto VC investment has dropped by only 2.8 percentage points since then.

France appears to be the greatest beneficiary, with capital investments for French crypto businesses increasing to 19.4% in the most recent quarter from less than 5% in the third quarter of 2022.