January 28, 2023

Despite a sluggish market, total funding for crypto companies in 2022 is expected to exceed investment in 2021. The research was presented by the data company Pitchbook. The numbers could point to a positive start to 2023.

Venture capital (VC) investments in cryptocurrency companies worldwide reached nearly $20 billion in the first nine months of 2022, according to the research cited by Reuters.

This is an increase of 41% compared to the same period last year. A total of $21.2 billion in investments was made last year.

High sequential growth but top crypto trading low

According to Pitchbook, VCs invested $1.5 billion in web3 startups in the third quarter of 2022, representing 44.5% sequential gains. If momentum continues year-over-year, investor interest could spark a relief in the industry.

However, according to CoinGecko, Bitcoin has now lost almost 67% of its value in the past year. BTC is currently trading in the USD 16,800 and USD 17,200 range. This is a huge drop from the all-time high of $69,000 last year. Ethereum, the second largest crypto by market cap, is trading near USD 1,250. It also suffered a major drop from last year’s high of $4,800.

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The recent collapse of FTX, which was on the 2022 bankruptcy list, has further soured market sentiment. The collapse came months after companies like Celsius Network and Voyager Digital filed for bankruptcy.

But according to Pitchbook’s Emerging Tech Indicator (ETI) for Q3, large investment deals are returning to normal. The report noted, “We recorded 10 ETI deals worth $100 million or larger, still above the quarterly historical average of five since 2015, but below the peaks of 22 in Q4 2021 and Q1 2022.”

Web3 and decentralized finance (DeFi) are likely to top the list of investments in the sector by 2023.

Positive drivers of investor interest in 2023

Robert Le, a crypto analyst at PitchBook added, “The lack of clear regulation and guidance remains one of the biggest concerns and limiting factors of the crypto industry. It is unlikely that there will be widespread adoption until there are better guardrails in the form of established laws and guidelines.

With the European Union finalizing the Markets in Crypto Assets (MiCA) bill, the regulatory change is underway. The UK Treasury is working to initiate new rules. Meanwhile, the US Congress has several crypto bills in the pipeline. Therefore, the next year could be a year of sweeping changes, especially when the collapse of the FTX has called for Congress to act quickly to pass CFTC laws.

Therefore, despite a drop in the number of high-value crypto deals in the last two quarters, year-on-year momentum may pick up in 2023 thanks to new regulations. However, many analysts are not optimistic about the price action in the first quarter of the new year.

In addition, cryptocurrency exchange Korbit’s “2023 Virtual Asset Market Prospect Report” predicts that the market cap will return to its previous level of over $1.5 trillion in the coming year, with monetary policy limiting the inflationary trend. The market cap is currently only about $800 billion as there is reduced demand for risky assets. However, the platform expects a trend reversal in 2023.

disclaimer

The information provided in independent research represents the opinion of the author and does not constitute investment, trading or financial advice. BeinCrypto does not recommend buying, selling, trading, holding or investing in cryptocurrencies

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