This May 12, the capital market analysis company PitchBook published a disturbing report regarding venture capital investments in the crypto sector. Indeed, the paper suggests that venture capitalists are less inclined to invest in the new industry. It turns out that the number of venture capital deals with crypto companies has been dropping globally. Discover the conclusions of the PitchBook report.
Regulatory uncertainty affects investment in the crypto sector
A study published in January suggested that 2023 could be terrible for fundraising in the crypto industry. Now, PitchBook reveals that crypto companies raised $2.6 billion in venture capital funds in the first quarter of 2023. This is an 11% drop in deal value related to venture capital deals. risk with crypto businesses. Also, this is the fourth consecutive quarter of decline in investment activity. The authors of the report said: This is the lowest amount of capital invested and transactions completed since the fourth quarter of 2020 “.
Why is investment in the sector plummeting?
PitchBook reported that an estimated $2.6 billion in venture capital funding was raised through 353 investment rounds. This shows that the number of financing rounds also fell by 12.2% in the first quarter. That said, the analytics company has identified the reasons behind the drop in investment. She cited in particular the lack of regulatory clarity.
PitchBook also thinks that the failure of crypto companies in 2022 played a role in the decline in investment. In this context, it mentioned the bankruptcy of the FTX crypto exchange platform. Finally, investing in crypto is affected by the lack of certainty about the benefits of many still-experimental projects.
It appears that the use cases and the number of users in the crypto sector have increased lately. However, the report pointed out: Cryptos are unlikely to gain mainstream adoption until better regulations and guidelines are in place. The lack of clear regulations is a major concern for the sector and is seen as a limiting factor. Government regulators, especially in the United States, tend to be reactive rather than proactive “. It should be noted that in the United States, regulatory uncertainty is pushing crypto companies overseas.
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