Despite numerous crashes and a tsunami of fear, uncertainty and doubt, 2022 was a good year for cryptocurrency venture capital. However, a new report warns that we may be facing a sharp drop in capital inflows into the market this year, which in turn could delay market growth.
To the report Cointelegraph, Galaxy Research notes that the number of deals and investment value of Web 3.0 venture companies and digital currency startups in 2022 will be slightly over $30 billion.
Alex Thorn, head of Galaxy Research, described 2022 as the year of the monster, overshadowed by the $31 billion venture capital investment in 2021.
Referring to the report published by this company on January 5 (December 15), Thorn stated that the macroeconomic conditions and digital currency market have led to a significant decrease in investment in the third and fourth quarters of 2022. These conditions are likely to continue until 2023, when macro market conditions improve.
Although the fourth quarter of 2022 saw the lowest volume of transactions and the lowest amount of invested capital in the last two years, 2,900 venture capital deals were closed this year, Thorn noted.
According to Thorne, if this trend continues, digital currency and Web 3.0 companies will probably have trouble securing capital in 2023.
Macroeconomic, monetary and digital currency conditions indicate that a difficult year is ahead for all players.
He added that the decrease in the value of companies and the stricter demands of investors create more difficult conditions for entrepreneurs to attract capital. He continued:
Startups in 2023 should be highly focused on infrastructure, reducing operating costs and increasing revenue.
As the US continues to dominate the cryptocurrency startup ecosystem, regulation and regulation will also impact investment.
According to this report, more than 40% of all digital currency venture capital deals last year were related to a US-based startup.
The importance of continued presence of the United States for these markets and their leading position provides sufficient reasons for the country’s policymakers to clarify and formulate rules and regulations for this emerging industry.
However, the willingness of investors and the (growth) of the cryptocurrency market is cyclical.
Gene Frantz, Google and Alphabet senior partner at independent growth fund CapitalG, told Forbes last month that the headlines and outlook for 2023 will end up looking much better than today.
Although the current news cycle may be discouraging, resilience and innovation combined with an improving economic outlook are restoring the optimism that has always defined our venture capital industry.
In a report on June 5 (December 15), Crunchbase also mentioned the decrease in the volume of venture financing in 2023. In 2022, the volume of global venture capital decreased by about 35% compared to 2021. Of course, the investment boom in the cryptocurrency industry this year has left a glimmer of hope for next year. However, the decline in global investment volume in 2022 paves the way for another tough year.