Venture capital investments remain strong despite the crypto winter that kept market capitalization below $1 trillion

Venture capital investments remain strong despite the crypto winter that kept market capitalization below $1 trillion

1. Global venture capital investments in crypto are expected to reach $584.4 billion by 2027

2. Venture capital investments remain strong despite the crypto winter that keeps market capitalization below $1 trillion

3. 2022 is expected to be the second highest crypto investment year for the entire venture capital community to date

Venture capital firms invested more than $30 billion in several crypto companies last year. According to a report by Sifted Intelligence, the number of investments in crypto and decentralized finance (DeFi) startups has grown exponentially in 2021. By the end of July this year, venture capital investments in cryptocurrency in 2022 amounted to $17.5 billion, according to a report by Sifted Intelligence. for PitchBook data.

Even as the crypto sector rebounds from the winter period, it is clear that venture capitalists continue to bet on this market, pouring money into crypto and blockchain projects. 2022 is set to become the second largest year for cryptocurrency investment to date. Let’s take a closer look at why.

Venture capital investments in 2022 motivated by startups

While the first half of 2022 saw global investments in cryptocurrency and blockchain reach nearly half of the total achieved in 2021, it is hard to deny that the crypto winter has taken its toll on this market. In the first half of 2022, venture capital (VC) investments in cryptocurrency startups declined by 26%. This was a result of the slump in cryptocurrency prices, the demise of terraUSD, and the liquidity issues experienced by crypto lenders Celsius and Three Arrows Capital.

According to Crunchbase statistics, investments in crypto companies fell from $12.5 billion in the first half of last year to $9.3 billion in the first half of 2022. But the drop in investment volumes does not mean that public interest in cryptocurrencies has declined with he-she. The same data also shows that the number of venture capital deals grew year-on-year from 456 to 534 in the first half of 2022.

The cryptocurrency industry has already gone through winters before. In previous years, investors would pull back when the price of bitcoin fell, while startups would decline while trying to survive. This time around, despite the dramatic headlines about the turbulent market, venture capital had an impressive second quarter of 2022, with deals totaling more than $4.2 billion.

The belief that the winter cryptocurrency market or the Bitcoin bear market could provide this sector with an opportunity to regroup and develop more successful products backed by large venture capitalists (VCs). They remain bullish on crypto and blockchain companies and fund them with billions of dollars.

web3 promise to stimulate enterprise investment

International companies realize that by making high-tech investments today, they will benefit from the creation and use of new Web3 technologies in the future. The increase in VC investment resulted from the creation of several well-known VC platforms to invest in Web3 and cryptocurrency this year. Examples include a $2.5 billion fund from Paradigm and a $1 billion fund from Electric Capital. Even TradFi giants like Nomura are navigating a cryptocurrency journey, creating their own money focused on digital assets.

To summarize, we have seen throughout 2022 that macroeconomic issues, including inflation, rising interest rates and geopolitical risks, are significant obstacles to investment. This will likely continue until the end of the year and into the early part of 2023.

But even if it’s not at the unprecedented levels we saw in 2021, venture capital investments in 2022 so far are still higher than any records for 2018, 2019 or 2020. As such, 2022 ranks as the second highest year An investment in crypto so far.

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