Despite a sluggish market, total funding for crypto businesses is expected to exceed investments in 2021 and 2022. Pitchbook, a data firm, presented the study. The figures could point to a promising start to 2023.
According to Reuters research, VC investments in cryptocurrency businesses reached nearly $20 billion globally in the first nine months of 2022.
This represents a 41% increase over the same period last year. Last year, $21.2 billion in investments were made.
According to Pitchbook, VCs invested $1.5 billion in web3 startups in Q3 2022, a 44.5% increase from the previous quarter. If the current trend continues, investor interest in the sector could spark a relief rally.
According to CoinGecko, Bitcoin has lost nearly 67% of its value in the last year. BTC is currently trading between $16,800 and $17,200. This is a significant decrease from last year’s all-time high of $69,000. Ethereum, the second largest cryptocurrency by market capitalization, is trading near $1,250. It has also dropped significantly from its peak of $4,800 last year.
The recent failure of FTX, which was included on the list of bankruptcies for 2022, has aggravated market sentiments even further. The failure occurred months after companies such as Celsius Network and Voyager Digital declared bankruptcy.
However, according to Pitchbook’s Emerging Tech Indicator (ETI) for Q3, large investment deals are returning to normal levels. “We recorded 10 ETI deals sized $100 million or larger,” according to the report, “still above the historical quarterly average of five since 2015, but down from the peaks of 22 in Q4 2021 and Q1 2022.”
“The lack of clear regulation and guidance remains one of the crypto industry’s greatest concerns and limiting factors,” said Robert Le, a crypto analyst at PitchBook. Mainstream adoption is unlikely until better safeguards, such as established laws and guidelines, are in place.”
The regulatory change is on its way, with the European Union finalizing the Markets in Crypto Assets (MiCA) bill. The UK Treasury is working to implement new rules. Meanwhile, the US Congress is working on several crypto-related bills. As a result, the following year could be a year of dramatic change, especially since the FTX collapse has prompted Congress to act quickly to pass CFTC legislation.
As a result, despite a drop in high-value crypto transactions in the last two quarters, the annual momentum could pick up in 2023 as a result of new regulations. Many analysts, however, are pessimistic about price action in the first quarter of the new year.
Furthermore, according to the “2023 Virtual Asset Market Prospect Report” from cryptocurrency exchange Korbit, market capitalization will return to its previous levels of more than $1.5 trillion in the coming year, with monetary policies limiting the inflationary trend. As there is less demand for high-risk assets, the market cap is currently around $800 billion. The platform, however, predicts a trend reversal in 2023.