Crypto VC Funding Dips to Q4 2020 Levels Amid Bear Dominance

• 297 crypto companies raised $2.1 billion in Q3 2023, down 36% from Q2 2023.
• Only 1.4% of transactions featured firms raising a Series B or later.

As the bearish sentiment prevails, startup financing in the cryptocurrency sector has returned to Q4 2020 lows. Messari, a blockchain analytics business, said on October 5 that 297 crypto companies raised $2.1 billion in Q3 2023, down 36% from Q2 2023 and roughly 70% from Q3 2022. Overall, $488 million was raised over 98 arrangements, with the majority coming from seed capital.

The researchers stated:

“Trends in deal counts show a significant shift away from later-stage projects and into early-stage projects over the last three years.”

Banking on Blockchain

Only 1.4% of transactions featured firms raising a Series B or later. However, between Q4 2021 and Q3 2023, the proportion of deals funded via strategic financing rounds jumped from 0.2% to over 22%. During the quarter, family office Alpha Blue Ocean’s ABO Digital invested $200 million in Islamic Coin, located in the UAE.

The U.S was home to 54% of all engaged venture capital investors, more than the rest of the world put together, despite regulatory uncertainties. In addition, investor focus has changed from consumer-facing apps to blockchain infrastructure, with the latter receiving much more funding over the previous three months.

The researchers further added:

“However, this trend may not last for long as more investors are beginning to realize that without successful user-facing crypto applications, infrastructure investments are less likely to generate their desired returns.”

Bitcoin (BTC) may be setting itself up for a potentially positive month in October, according to historical statistics. This time of year often brings bullish moves to BTC, giving investors renewed optimism after a rough few months.

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