The crypto industry continues to face challenging times as the crypto winter that began in 2022 shows no signs of thawing. According to recent data from FundStrat, a prominent data analytics firm, the venture capital (VC) funding for crypto firms has declined for the sixth consecutive quarter, plunging to $1.4 billion in Q3 2023. This is a stark contrast to the more than $10 billion that flooded into the crypto sector during the heady days of Q1 2022 when many cryptocurrencies were reaching their all-time highs.
The decline in VC funding isn’t the only concern, as the number of individual deals has also taken a hit, dropping by 30% to a total of 214 deals. However, despite this downward trend, it’s essential to keep perspective. FundStrat notes that VC funding for crypto firms is still 2-3 times higher than the levels seen between 2018 and 2020.
FundStrat highlights the crypto venture market’s resilience, stating, “Despite a sustained decrease in total capital investment, the crypto venture market has continued to attract more interest compared to previous market cycles.” They also point out some potential positive developments on the horizon, such as the increasing likelihood of a spot Bitcoin exchange-traded fund (ETF) approval and the majority of US monetary tightening being in the past.
Shifts in Investment Focus
In the realm of crypto investments, certain trends are emerging. In Q3, crypto infrastructure firms continued to secure the lion’s share of funding, with $586 million raised across 79 deals. However, their dominance has waned compared to the earlier quarters of 2023.
One standout in this category is Flashbots, which secured $60 million in funding, achieving unicorn status with a valuation exceeding $1 billion. This success demonstrates the ongoing demand for infrastructure development within the crypto space.
On another front, Web3 and NFT (Non-Fungible Token) projects have seen a surge in interest, raising $325 million across 55 deals. Social applications, such as friend.tech, are driving this growth, focusing on novel ways to monetize intellectual property as content creators explore new formats. Sound.xyz, a project that aims to revolutionize content monetization, raised $20 million in a series A funding round led by Andreessen Horowitz.
Centralized Finance (CeFi) experienced a resurgence in investor interest in Q3, becoming the third most funded category. This shift follows a period of stagnation during the first half of 2023, partly due to the high-profile failure of centralized cryptocurrency exchange FTX. However, this renewed interest in CeFi was concentrated in fewer deals, signaling investors’ preference for established companies with a proven track record. In Q3, CeFi raised $226 million across 14 deals, with a significant portion going to BitGo, a crypto custody firm.
Exploring High-Risk-High-Reward Crypto Investments
While blue-chip cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) remain the cornerstone of many crypto portfolios, investors seeking potentially exponential near-term gains may consider alternative high-risk-high-reward strategies, such as participating in crypto presales.
Crypto presales involve purchasing tokens of early-stage crypto projects to support their development. These tokens are typically offered at lower prices, and history has shown that presales can deliver substantial returns to early investors. Many of these projects are backed by strong teams and innovative visions for revolutionary crypto applications and platforms.
For investors interested in exploring crypto presales, the team at Cryptonews dedicates significant effort to identifying promising projects. They’ve compiled a list of 13 crypto presales to watch in 2023, offering potential opportunities for those willing to navigate the high-risk landscape of early-stage crypto investments.
In conclusion, the crypto industry faces ongoing challenges with declining VC funding, but it remains resilient, attracting continued interest. As the crypto landscape evolves, investors must stay informed about emerging trends and opportunities, whether in infrastructure, Web3, NFTs, CeFi, or high-risk presales, to make informed decisions in this dynamic space.