After enduring a prolonged period of volatility and uncertainty, the crypto industry witnessed a resurgence in venture funding in the fourth quarter of 2023, marking the first uptick since the onset of the “crypto winter” nearly two years ago.
According to data from PitchBook released on Thursday, venture funding for crypto-related companies reached $1.9 billion in the final quarter of 2023, representing a 2.5% increase compared to the previous quarter.
This positive trend comes as a relief for crypto entrepreneurs who have struggled amidst the challenging fundraising landscape in recent years.
The “crypto winter,” characterized by a downturn in investor sentiment and heightened regulatory scrutiny, dampened the fundraising efforts of crypto startups throughout 2022.
Rising interest rates from major central banks further exacerbated the situation, prompting investors to retreat from riskier assets including cryptocurrencies.
Crypto winter
Compounding the challenges were high-profile collapses of crypto firms such as Do Kwon’s Terra and Sam Bankman-Fried’s FTX, leading to significant losses for major venture funds like Andreessen Horowitz and Sequoia Capital.
However, with a resurgence in crypto asset prices and improved public market valuations for companies like Coinbase and MicroStrategy, investor confidence has begun to rebound. Over the past year, bitcoin has more than doubled in price, surpassing $52,000 per coin, while Coinbase stock has surged nearly 140%.
“We’re starting to see a correlation between investments in private markets and the public markets,” says a spokesperson from PitchBook in an interview with CNBC.
“The uptrend in publicly-traded crypto companies is now being reflected in private investments as well.”
Capital flowing
While the total number of deals declined slightly in the fourth quarter, PitchBook suggests that capital is flowing towards stronger startups within the crypto space.
This concentration of investment is evident in notable fundraises such as those for Swan Bitcoin and Blockchain.com, which raised $165 million and $100 million, respectively.
