Fundraising within the cryptocurrency realm has experienced a significant deceleration during the initial half of this year. Based on data from PitchBook, a report by Fortune reveals that merely eight venture capital funds with a focus on crypto managed to raise a total of $500 million globally as of May 16. This figure accounts for a mere 2.3% of the overall funds raised in 2022, indicating a substantial decline of 90% in the number of financially supported funds.
The scarcity of funds can be attributed to the ongoing downturn in the crypto industry, marred by various scandals. The uncertainty surrounding future regulations, coupled with the reverberations caused by a crisis within the banking sector, has also dampened the enthusiasm for fundraising activities.
Fallen crypto lenders, and a fall in VC funding
The November crash of cryptocurrency exchange FTX triggered a series of events that continue to impact the industry. The failure of crypto-friendly Silicon Valley Bank marked the beginning of a chain reaction in 2023, with Silvergate Bank and Signature Bank subsequently following suit. These failures reverberated throughout the crypto community, causing significant shockwaves.
As a result of the banking crisis, regulatory bodies have intensified their scrutiny of crypto platforms, fostering increased uncertainty regarding the sector’s future. In a significant development on June 5, the US Securities and Exchange Commission filed a lawsuit against Binance, the world’s largest crypto exchange, alleging multiple securities violations.
The prevailing atmosphere surrounding cryptocurrencies has dampened enthusiasm for investment. According to PitchBook data, global venture capital funding for crypto experienced an 80% plunge in the first quarter of 2023 compared to the previous year, dropping from $12.3 billion to $2.4 billion.
Additionally, overall venture capital activity has declined due to a global economic slowdown, registering a year-over-year plummet of 53% in the first quarter.