Last updated on July 5th, 2023 at 01:16 pm
According to data from RootData, a crypto data analytics platform, venture capital investments in cryptocurrency firms have experienced a significant decline of over 70% within the last 365 days.
The sharp decline stands in stark contrast to the sector’s performance in the previous year. In June 2022, there were a total of 149 funding rounds in the sector, and they secured an impressive $1.81 billion. However, in the same period in the current year, only 83 projects have managed to secure $520 million, the lowest amount ever recorded in a month.
While there were occasional upticks in investments over the past year, the overall trend for venture capitalists’ participation in the digital asset sector has been negative. Notably, September 2022 stood out as a record-breaking month, with $1.85 billion invested across 138 funding rounds, making it the most significant investment month ever. Similarly, June 2022 witnessed the highest number of funded projects, totalling 149 rounds.
The most funded sectors within the digital asset industry were infrastructure, centralized finance (CeFi) businesses, and the games sector. CeFi businesses, such as OPNX and Chiliz, received a total of $101 million in funding, accounting for approximately 20% of the overall funding in the cryptocurrency space.
The most funded sectors of the digital asset industry were infrastructure, centralized finance (CeFi), and games. CeFi businesses, like OPNX and Chiliz, received a total of $101 million in funding and accounted for approximately 20% of the overall funding in the cryptocurrency space.
Regarding blockchain platforms, Ethereum took the lead in attracting VC backing. It hosted 1,826 projects that received VC funding within the year. Polygon (MATIC) followed closely; it hosted 1,076 projects with investment rounds.
Geographically, the United States stands out as the leading country; it accounted for 34% of the total financing among the listed countries.
RootData reported Coinbase Ventures as the most active VC in the digital asset industry. The American venture capital company participated in an impressive 71 funding rounds in the previous year. Hashkey Capital and Shima Capital closely followed as the second and third most active VCs; they funded 54 and 49 startups, respectively.
The Emergence of AI May Be Responsible for the Dwindling VC Investment in Crypto
The AI sector has garnered significant attention and popularity in the last few months, overshadowing the once-dominant cryptocurrency asset class. For instance, Gensyn AI, a UK-based business, recently secured an impressive $43 million in a Series A funding round led by a16z Crypto, a prominent venture capital firm in the cryptocurrency space.
A report by the World Bank suggested that while the growth of the crypto asset class has been fueled by increasing institutional and retail acceptance, AI has now positioned itself as the preferred investment sector. This is further supported by a Forbes report, which indicates a surge in global popularity for the search term “AI” on Google and an increasing number of references to AI technologies during earnings calls among S&P 500 companies.
The cumulative effect has been a remarkable upswing in AI-related stocks, with the iShares Robotics and Artificial Intelligence ETF significantly outperforming the S&P 500 index with a growth rate of over 21% year-to-date.
If you want to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.
“Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”
