Venture capital (VC) investments in crypto companies are down 26% in the first half of the year, compared to the first half of 2021. Investments in crypto companies totalled $9.3 billion in the first six months of 2022, down from the record $12.5 billion in the first half of 2021, according to data provided by Crunchbase.
It should come as no surprise that more money went into crypto in the past year as compared to this one. Looking beyond the monumental price drops we have seen, a recent Nairametrics report revealed that 72 of the top 100 crypto’s by market capitalization have lost 90% of their value or more.
VC investments are down practically everywhere as data from Crunchbase reveals that second-quarter funding fell 26% quarter over quarter from $162 billion in the first quarter and 27% year over year from $165 billion in the second quarter of 2021.
What you should know
The 2022 venture capital market has thus far proven to differ greatly from last year which was record-breaking in almost every way. Data from Crunchbase reveals that the global venture investment last year totalled $643 billion, compared to $335 billion for 2020, a 92% growth year over year. The growth seen represents more than 10x what it was a decade earlier.
Although there is a 26% drop, it does, however, show that VCs are still interested in investing in the industry despite the slew of negative press and monumental price drops the industry has witnessed in the first half of the year 2022. This is because the deal flow actually increased year-over-year from 456 deals to 534 deals. However, the increase in the deal flow also indicates that smaller deal sizes have helped drive the lower overall investments.
Looking closer into the figures, the total investments by VCs in the second quarter totalled more than $4.2 billion, roughly flat when compared to the same period last year and only down $1 billion from the first quarter and well off the record high of $6.1 billion hit in the fourth quarter of last year.
The brazen performance in Q2 comes during a quarter that saw a total of $156 Billion in Total Value Locked (TVL) lost in the DeFi Ecosystem, total exploits in the space amounted to approximately $430 million, the collapse of the Terra blockchain, its native token, now called Luna Classic (LUNC) and its algorithmic stablecoin, now called terraUSD classic (USTC) and liquidity crises faced by crypto lender Celsius and crypto hedge fund Three Arrows Capital.
One of the reasons the first quarter’s numbers were higher was that it saw more large rounds compared to Q2. Six rounds of $400 million or more were announced in the quarter, whereas the second quarter saw only one such round. The round in question was Circle, the company behind the USDC stablecoin, closing a $400 million private equity round from BlackRock, Fidelity Management and Research, Marshall Wace and Fin Capital.
Other big rounds in the second quarter included the Germany-based Trade Republic, which closed a Series C extension worth approximately $250 million in June, Binance US closing a $200 million seed round in April and Unizen raising a $200 million venture round in June.
These funding rounds are especially impressive considering how brutal this year has been to the crypto space. Values for the two largest cryptocurrencies, Bitcoin and Ether, are down more than 70% from their respective November highs. Asides from this, the industry saw one of its stablecoins, which was ranked the third highest by capitalization at peak levels, completely collapse.
Additionally, large lending platforms like Babel Finance and Celsius Network suspended withdrawals and transfers due to market uncertainty and liquidity issues. This has further led Celsius to file for bankruptcy. To top off the quarter, which many are liking to the great depression of 1929, crypto hedge fund Three Arrows Capital (3AC) collapsed after the downturn in digital currencies left it unable to meet obligations. The firm, which managed about $10 billion in assets as recently as March, filed for Chapter 15 bankruptcy protection on July 1. Now, recent reports suggest that its co-founders appear to be on the run from creditors.
Despite this slew of bad news, the broader pullback didn’t stop Andreessen Horowitz (a16z) from launching a record-breaking $4.5 billion crypto fund in May, bringing its total funds raised for crypto investing to $7.6 billion. And just this week, Lightspeed Venture Partners said, as part of its announcement on closing more than $7 billion in new funding, it is creating Lightspeed Faction, an independent team to invest in blockchain infrastructure.
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