The crypto market collapse last year was accompanied by slowing investment in the financial technology space in a broader manner.
Sources reveal that the United Kingdom’s crypto and fintech industries witnessed investments plunge in the latter half of 2022 amid a combination of turbulent macroeconomic conditions and record-high inflation.
According to figures released by KPMG, a global professional services network and one of the Big Four accounting organizations, businesses in the region completed 591 fintech deals last year, compared to 724 in 2021.
Notably, the report highlights that the figures denote a $22 billion drop in fintech investment in 2022 to just $17 billion in 2021, marking a total of 60% decline. Sources suggest that the drop reflects the approximate equal drop in total cryptocurrency market capitalization within the specified period. The crypto market cap fell from $3 trillion in November 2021 to under $800 billion in December 2022.
According to Karim Haji, a partner at KPMG, fintech investments also seemed to dry up as the crypto market entered free fall last year. He added that the year’s first half saw more investments than the second half. He said:
The variance highlights the shift in investor sentiment in the face of increasing geopolitical challenges leading to the lack of IPO exits, the downward pressure on valuations, and market turbulence.
In 2022, several huge downfalls like that of Celsius, Voyager, and Terra occurred around the mid-last year, which led to the collapse of the crypto exchange FTX in November.
Reportedly, the largest drop amongst the UK’s fintech subsectors was payment firms, which absorbed $3.6 billion of investments last year. On the worldwide scale, the fintech firms reaped $161.4 billion across 6000 investment deals last year compared to $238.9 billion in 2021.
With the drop in fintech investments, naturally, investments in crypto and blockchain-specific firms also fell from $30 billion in 2021 to $23.1 billion in 2022. Simultaneously, value locked within DeFi protocols has plunged to $50 billion, down from $180 billion at its peak.
Another report from an American hedge fund specializing in cryptocurrencies published last month showed that venture capital investments in crypto firms fell by over 75% between the fourth quarter of 2021 and the fourth quarter of 2022.
Todayq News reported a few days ago that the happenings in the crypto industry caused a shift in the risk appetite of venture capitalist (VC) firms, with general VC firms reducing their investments in digital assets. However, despite the slowdown in investment from general VCs, crypto-specific VCs remain optimistic about the potential of blockchain technology. In fact, a number of high-profile VC firms, including Andreessen Horowitz and Union Square Ventures, have established dedicated crypto funds to invest specifically in the industry.
Not just that, Credit Sussie, the Swiss investment bank, announced a significant investment in the crypto world, with a $65 million contribution to the fundraising run of Taurus, a digital asset infrastructure dealer last week.
This move represented Credit Suisse’s ongoing efforts to improve its financial results, which have seen mixed balance sheets in recent years. One of the measures taken by the bank to achieve this was a massive spending review, but the move to invest in the crypto sector has also played a role. The latest quarterly report shows that 30% of the bank’s total revenues now come from crypto.