Crypto VC Investment Trends Soured In Recent Months

In the closing stages of June, a notable decline of 29.73% in venture capital (VC) funding was observed, totaling a mere $779.32 million across 62 independent deals. Despite the United States Federal Reserve’s decision to pause interest rate hikes in June, the global economic climate remains unchanged, attributed largely to geopolitical uncertainties and ongoing inflation control efforts worldwide. This backdrop led to investors adopting a risk-off strategy in June, interrupting the growth trajectory witnessed over the preceding three months.

A Closer Look at June’s VC Deals

It’s crucial to discern that this does not necessarily indicate a bearish trend. The overall forecast for 2023 remains promisingly bullish. Adding to this optimism are recent developments like the Bitcoin exchange-traded fund (ETF) applications from industry giants such as BlackRock, VanEck, WisdomTree, and Fidelity, coupled with Ripple’s legal triumph against the Securities and Exchange Commission.

These encouraging events led to immediate positive reactions in the cryptocurrency market. However, VC investments often reflect these trends with a certain lag, given institutional investors’ relatively conservative and inert nature. The ongoing global economic uncertainties may also contribute to a temporary restraint in VC activities.

The breakdown of VC deals in June remained largely consistent, and the investment focus continued to display stability. Blockchain infrastructure topped the charts, securing 20 individual deals with funding exceeding $493 million.

Decentralized Finance (DeFi), regaining some ground, attracted 20 deals with investment surpassing $144 million. Surprisingly, Web3 experienced a dip in popularity among VCs in June, raking in about $107 million across 18 deals. Centralized Finance (CeFi) and non-fungible tokens (NFTs) once again rounded out the list. These verticals secured about $32 million and $2 million in investments across a few individual rounds.

Notable Investments and Deals

June’s largest deal was the $200 million investment Islamic Coin (ISLM) secured from Alpha Blue Ocean’s ABO Digital. The project aims to establish a digital financial instrument for the global Muslim community, and its total funding has now crossed the $400 million mark. Trailing far behind Islamic Coin was the $43 million Gensyn deal, spearheaded by a16z Crypto with contributions from CoinFund, Canonical Crypto, among others. Gensyn, a blockchain-based AI initiative, bridges the gap between computing power buyers and sellers.

Also noteworthy is Mythical Games, which raised $37 million in a Series C round led by Scytale Digital and supported by ARK Invest, Animoca Brands, and others. These funds are earmarked for launching a new marketplace and exploring other revenue-generation opportunities. Furthermore, Bitpanda Pro closed a Series A round for $33 million, led by Peter Thiel’s Valar Ventures, and announced its rebranding to One Trading. The funds will be used to extend its reach to professional traders and institutions throughout Europe.

What Lies Ahead for Blockchain and Crypto VC Investments

While March, April, and May experienced an uptick in VC funding into the blockchain arena, this trend reversed in June, hinting at possible uncertainties looming. However, the overall momentum continues to rise steadily, making these monthly fluctuations less significant in the grand scheme. 

The forthcoming months of July and August are anticipated to shed light on the more influential factors – general macroeconomic conditions or crypto market events. Only time will tell which will tip the scales.

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