2022 was a “monster year,” according to Alex Thorn, head of research at Galaxy, that was only slightly surpassed by the $31 billion in VC investments in 2021.
Despite several high-profile meltdowns and the ensuing wave of FUD (fear, uncertainty, and doubt), last year was a significant one for crypto venture capital. But this year, a cryptocurrency researcher cautions, the money may not flow as freely. According to Galaxy Research, investment firms invested slightly more than $30 billion in Web3 and cryptocurrency enterprises in 2022.
But according to a January 5 report by Thorn, the macroeconomic and bearish crypto market conditions caused sizable investment declines in Q3 and Q4. Until the macroeconomic and cryptocurrency market conditions improve, this will probably last until 2023.
“The macro, monetary, and crypto asset environment portends a difficult year ahead for all involved.”
Thorn indicated that while there were 2,900 venture deals in 2022, the fourth quarter saw the fewest deals and the least amount of cash committed to Web3 and crypto companies in the previous two years. Thorn said that if this pattern holds, crypto and Web3 companies may find it difficult to raise money in 2023.
The environment for entrepreneur financing will get more challenging, he continued, as a result of falling company valuations and tougher investor demands. In 2023, companies will need to be laser-focused on the fundamentals in order to control operating costs and boost revenue.
The legal climate in the United States will also have consequences because America still leads the crypto-startup ecosystem, as the research also noted that more than 40% of all venture capital deals in the industry last year involved a startup with a U.S. headquarters.
“The continued importance of the U.S. to these markets, and its leading position, provide ample reason for U.S. policymakers to clarify and codify rules and regulations for the emerging space.”
Currently, one of the world’s largest companies associated with the sector, Meta is facing backlash and is struggling to defend its huge expenditure on its metaverse-related projects. Last year, Todayq news reported that the company faced backlash from various tech-industry executives like Phil Spencer, the CEO of Microsoft Gaming and Evan Spiegel, CEO of Snap.