Are venture capitalists distancing themselves from the cryptocurrency industry? Would they no longer believe in the potential of these digital assets? At least that’s what a recent report suggests, with figures showing a considerable drop in investments by venture capitalists in cryptocurrencies. A drop potentially due to many reasons, including recent events that have shaken the crypto industry.
Cryptos: a 70% drop in VC investments in one year
While institutional investors see potential in cryptos and show interest in these digital currencies, the time seems to be wary on the side of venture capitalists. In fact, the data platform RootData revealed that venture capitalists’ investments in cryptocurrencies have fallen by more than 70% in one year.
If the crypto industry received $1.81 billion from VCs in June 2022, the harvest is not very fruitful this year for the account of the same month with only $520 million. According to RootData, 26 projects in the infrastructure category received $213 million in funding in the past month. This is a 50% decrease compared to the previous month during which the same category received $410 million for the financing of 28 projects.
The second most funded category is CeFi with $101 million. It is followed by the gaming category with $62 million according to figures from RootData. Coinbase Ventures which participated in 71 rounds remains the most active venture capital firm according to the platform.
The reasons for the decline in VC investments
RootData points out that artificial intelligence is stealing the limelight from cryptocurrencies and attracting venture capitalists. To justify this, EvanCheng, co-founder and CEO of the company Mysten Labs points to the ability of AI products and applications to meet the needs of a large audience while the crypto ecosystem remains focused on itself.
The fall of FTX and Terra (LUNA), the recent bank failures in the United States, and the numerous regulatory repressions in the country are also other reasons that may explain this decrease in investments by venture capital companies. These tumults have visibly alienated VCs from the crypto industry.
In line with the predictions of some experts, crypto companies are therefore gradually losing favor with venture capitalists. Should we be worried about the cryptocurrency industry?
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