Crypto investment continues to slide and has yet to find a clear bottom: report

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Bitcoin and Ethereum may be on the rise again, but venture capitalists have continued to falter in the crypto space, according to a new report from Galaxy Research.

Crypto and blockchain firms saw $2.3 billion in investments from venture capitalists in the second quarter of this year. This represents a sharp drop from the same period a year ago, when venture capitalists invested more than $8 billion.

The crypto industry was teeming with venture capital during its pandemic-era boom, attracting a record $13 billion in the first quarter of 2022. But a tough trading environment and higher interest rates have effectively reduced the flow of transactions to a small trickle and it continues to shrink.

Invested capital has yet to find a clear bottom, according to the report. The rise in interest rates continues to reduce the appetite of beneficiaries to bet on long-term risky assets such as venture capital funds.

As a result, the report notes, the amount of venture capital invested in crypto businesses has now declined for the fifth consecutive quarter.

Venture capital firms play a vital role in fueling the digital asset space, investing in startups and funding their growth in exchange for equity or tokens.

While the amount of money disbursed to crypto firms overall decreased, the number of transactions increased to 456 from 439 in the first quarter, the report noted. Transactions specifically involving companies creating privacy and security products increased by 275%.

In the crypto space, startups focused on trading, trading, investing, and lending attracted the most capital with $473 million. This was followed by companies focused on Web3, NFTs, games, DAOs and the metaverse, which received $442 million.

Magic Eden, the cross-chain NFT marketplace, was highlighted in the report for its recent $52 million deal, which Galaxy Research said was the largest in the NFT space for the quarter.

Despite regulatory headwinds, Galaxy Digital also reported that crypto startups in the United States continue to receive sustained attention from venture capitalists, suggesting that the recent regulatory blitz by the Securities and Exchange Commissions has not has not entirely deterred investors.

The report noted that 45% of the capital invested in crypto companies went to US-based companies, followed by the UK at 7.5% and Singapore at 5.7%.

The report added that the lack of venture capital activity is not necessarily unique to crypto, explaining that tighter monetary conditions have weighed on the ability of venture capital firms to raise funds for investments at all levels.

But the report acknowledges that other factors could also be at play, given the bankruptcies that defined the crypto space last year, indicating that many claimants are feeling burnt out after spectacular outbursts by several capital-backed companies. risk in 2022.

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