Crypto VC Funding Bounces Back Setting Stage for Market Comeback

According to a recent report, the crypto venture capital (VC) market has shown resilience amid a downturn, signaling a potential comeback for the sector in the near future. Despite a decline in the second half of 2022, the year became the biggest in history for crypto VC funding with over $26.2 billion invested, compared to $25.1 billion in 2021.

The top 300 global crypto VC firms collectively manage $83.9 billion in capital, with San Francisco emerging as the leading city for crypto VC firm capital, followed by New York City, Hong Kong, Singapore, Austin, London, and Shanghai.

While Q4 2022 saw a significant 77% drop in new crypto VC investment compared to Q1 2022, the market appears to be recovering. February 2023 saw $872 million invested in crypto and blockchain firms, a 52% increase from the $574 million in January 2023.

The report continued that crypto VC investment continues to outpace its 2019 levels. Comparing Jan-Feb 2019 to Jan-Feb 2023, there is a 3.1x increase in venture capital invested in the sector, indicating that the digital assets industry is maturing and attracting more institutional capital.

As the sector gears up for the April 2024 Bitcoin halving and the likely ensuing 2025 crypto bull market, the biggest crypto-focused VC firms by fund size include A16Z Crypto, Binance Labs, Multicoin, Pantera, and Paradigm. Meanwhile, Coinbase Ventures, DCG, NGC, AU21, and Animoca lead in all-time crypto investment count.

The most active crypto VC firms over the last 12 months, per the report, are Big Brain Holdings, Shima Capital, Infinity Ventures, GSR, and MH Ventures. Furthermore, the report cites Pitchbook data stating that Q1 2023 is on track to secure around $1.8 billion in new capital invested, the lowest since Q4 2020. However, the recent uptick in February 2023 investments indicates a positive trajectory heading into Q2 2023.

It went on the add that smart venture firms are placing bets on web3, gamefi, DeFi, infrastructure, and distributed ledger technology (DLT) while valuations are discounted. These investments are expected to pay off as the market recovers and technologies like smart contracts, distributed ledgers, and tokenized financial assets continue to shape the future of global finance.

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