Crypto Companies Raise $2.6 Billion in VC Funding in Q1 2023 Amid Regulatory Uncertainty

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Amid regulatory uncertainty causing problems for the cryptocurrency industry, venture capital (VC) deals with cryptocurrency companies continued to decline in the first three months of 2023, which represents the fourth consecutive quarter of decline in investment activity.

As it happens, crypto firms raised $2.6 billion in venture capital globally in the first quarter of this year, representing an 11% drop in transaction value from quarter to quarter. on the other (QoQ), according to research published by financial market analyst firm PitchBook on May 12.

Specifically, crypto-focused firms around the world managed to raise this amount over 353 investment rounds, a figure that alone represents a 12.2% drop in the number of transactions during this period.

Crypto venture capital transactions by quarter. Source: PitchBook

As the authors of the analysis further noted, this is the lowest amount of capital invested and deals closed since the fourth quarter of 2020, which represents the fourth consecutive quarter of declining business activity. ‘investment.

Reasons for the drop in investment

Notably, the study refers to a lack of regulatory clarity, the failure of several crypto companies in 2022, including the FTX crypto trading platform, and uncertain practical benefits in many still experimental projects, such as due to the continued decline in venture capital investment, despite the expansion of use cases and a growing number of users.

Actually:

Widespread crypto adoption is unlikely to happen until better regulations and guidelines are in place. The lack of clear regulations is a major concern for the industry and is seen as a limiting factor. Government regulators, particularly in the United States, tend to be reactive rather than proactive.

That said, analysts are certain that 2023 could present a political inflection point for the industry, expecting financial regulators and central banks around the world to focus more on crypto assets and ramp up their work in writing new rules that help prevent an FTX-type collapse in the future.

Elsewhere, research from Clarify Capital published in April found that 52% of 254 investors surveyed in 2022 in the Catching the Eyes of Investors study plan to refrain from buying digital assets in 2023, as Finbold reported. April 13.

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