Crypto Saw 20% More VC Deals In First Quarter: Galaxy

Crypto had a messy 2022. But if the venture capital (VC) scene is anything to go by, things may be looking up.

Crypto deal activity improved last quarter, per Galaxy Digital, with 439 deals compared to just 366 in the fourth quarter of 2022. The 20% jump was largely driven by pre-seed deal activity, which more than doubled from the previous period.

But a higher number of deals didn’t convert to more capital. The crypto and blockchain sectors saw lower venture capital funding in the first quarter, altogether hitting $2.4 billion — the lowest amount since Q4 2020.

“In Q1 2023, crypto and blockchain startups raised less than half the amount raised just two quarters ago,” Alex Thorn, head of firmware research at Galaxy, wrote in the report.

Companies involved in Web3, NFTs, DAOs, metaverse and the gaming subsector scored the most deals. Meanwhile, companies tied to trading, exchange, investing and lending raised the majority of venture funding ($538 million). 

Wallet-based startups were a close second at $519 million. 

Capital raises were dominated by US-based companies, followed by France. And it was mostly younger companies, established in 2021 and 2022, that raised venture deals.

Thorn wrote that if VC activity continues at this rate, 2023 would be a hot year for the industry.

“Despite significant drawdowns from the all-time highs in venture activity seen in 2021 and 2022, crypto VC activity remains elevated when looking back to the crippling previous crypto winter, even despite the rising rate environment stifling allocator interest,” he said. 

“If the current pace holds exactly, albeit an unlikely scenario, 2023 will see more money invested than 2018, the biggest year for crypto VC prior to the last bull market.”

Mirva Anttila, director of digital assets research at WisdomTree, agreed that the crypto industry currently faces a positive trajectory.

“We believe we could be on the cusp of the fourth major bull market in crypto, although the exact timing is uncertain,” she said in a recent note. 

“Our belief is that the next bull market will be enabled by advancements in speed and scalability of the blockchain networks, more intuitive user interfaces, and innovations in blockchain wallets, as well as developments in digital identity, which will pave the way for Web3 applications.”

Venture funding aside, crypto markets are enjoying a healthy bear market reprieve. Bitcoin (BTC) is up by over 80% this year, while ether (ETH) is up 60%, as some forecast that recent bank failures could inspire the Federal Reserve to taper its aggressive monetary tightening.

---

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.