Scandals, economic uncertainty and an overall downturn in VC funding have hit the sector hard
Fundraising in the cryptocurrency world has slowed to a crawl in the first half of this year. Just eight venture capital funds focused on crypto had raised a combined $500 million globally as of May 16, according to a report from Fortune citing PitchBook data. That adds up to only 2.3% of the total value raised in 2022, and marks a 90% drop in the number of funds to receive financial backing.
Money has dried up amid a downturn in the scandal-hit crypto space. Uncertainty around future regulation, along with the ripple effects of a banking sector crisis, have also put a damper on fundraising.
The crash of cryptocurrency exchange FTX set off a chain reaction in November that has reverberated into this year. Crypto-friendly Silicon Valley Bank was the first lender to fail in 2023, followed by Silvergate Bank and Signature Bank, sending shockwaves through the crypto community.
In the wake of the banking crisis, regulators have stepped up scrutiny of crypto platforms, seeding further doubt about the future of the sector. On June 5, the US Securities and Exchange Commission sued Binance, the world’s largest crypto exchange, alleging it committed a series of securities violations.
The current climate around crypto has chilled enthusiasm for investment. Global venture capital funding for crypto plunged 80% in the first quarter of 2023 compared to the previous year, from $12.3 billion to $2.4 billion, according to PitchBook data.
Meanwhile, overall VC activity has dropped amid a global economic slowdown, plummeting 53% year-over-year in the first quarter.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.
