Crypto VC Investment Plummets by 70% in Just One Year, Study Finds

UTC by Chimamanda U. Martha · 3 min read
Crypto VC Investment Plummets by 70% in Just One Year, Study Finds
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When categorizing the funding by sector, the infrastructure category emerged as the frontrunner, with $213 million recorded in June.

The crypto industry has witnessed a significant decline of over 70% in venture capital investments over the past year, according to a recent report published by RootData, a leading digital asset data provider.

June 2022 marked a remarkable milestone for the digital asset space, as it witnessed an impressive influx of $1.81 billion across 149 funding rounds.

However, this year has taken a different turn, with a significant decline in investment. In the past month, only $520 million has been invested in 83 projects, making it the lowest-funded month to date.

Despite a few months showing an upward trend, the overall trend for venture capitalists (VCs) interested in the digital asset space has been on a downward trajectory. Notably, September 2022 reached its highest point on record, with total funding of $1.85 billion across 138 rounds. Similarly, June of the same year boasted the highest number of recipients, with 149 funding rounds.

Centralized Finance Emerges among Most Founded Category in Crypto

When categorizing the funding by sector, the infrastructure category emerged as the frontrunner, with $213 million recorded in June, supporting the development of 26 projects.

Despite this substantial funding, there was a considerable decline of approximately 50% compared to the previous month, which saw 28 crypto projects receive about $410 million from venture capitalists.

The RootData report showed that the infrastructure sector was closely followed by centralized finance (CeFi), which includes companies like OPNX, a new crypto exchange launched by founders of the now-defunct crypto hedge fund, Three Arrows Capital, and Chiliz, a global company that deals with blockchain for sports and entertainment. CeFi secured a second position as the most funded sector with $101 million, accounting for nearly 20% of all financing.

The gaming sector took third in the rankings, receiving about $62 million, with Mythical Games, a blockchain gaming platform emerging as the top contributor. The company raised $37 million in its Series C1 funding round last month and is currently valued at $1 billion. The just-concluded financing round saw participation from Animoca Brands, ARK Invest, MoonPay, Proof VC, Stanford Athletics, Andreessen Horowitz, WestCap, Gaingels, Signum Growth, and Struck Capital.

Decentralized finance (DeFi) and non-fungible tokens (NFTs) rounded off the list of categories, occupying the fourth and fifth positions, respectively.

Ethereum: The Most Funded Cryptocurrency Project

Over the past year, Ethereum has been the most funded crypto project, with a total of 1,826 projects receiving investments.

Polygon (MATIC), a layer 2 scaling solution built on the Ethereum blockchain, follows behind with 1,076 funding rounds.

In terms of geographical distribution, the United States received the highest share of funding, accounting for 34% of the total, surpassing all other nations on the list. However, this distribution is subject to change in the near future.

Among the venture capital firms, Coinbase Ventures emerged as the most active, participating in 71 funding rounds over the past year. Hashkey Capital and Shima Capital followed closely behind, funding 54 and 49 projects, respectively.

Meanwhile, the decrease in venture capital investment in the crypto industry can be attributed to various factors, including the market crash in 2022, coupled with the devastating collapse of FTX and Terra, and increased regulatory pressure from the US Securities and Exchange Commission (SEC). These factors have made venture capitalists more cautious and less interested in investing in the emerging crypto economy.

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