The end of the crypto rush? PitchBook reveals alarming figures!
On May 12th, PitchBook, a capital market analysis company, published a concerning report regarding venture capital investments in the crypto sector. The document suggests that venture capital firms are less inclined to invest in the emerging industry. It turns out that the number of venture capital deals with crypto companies has decreased globally. Let’s delve into the findings of PitchBook’s report.
Regulatory uncertainty is impacting investment in the crypto sector
A study published in January suggested that 2023 could be a terrible year 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 represents an 11% decline in the value of transactions related to venture capital deals with crypto companies. Moreover, this marks the fourth consecutive quarter of declining investment activity. The report’s authors stated, “This was the lowest amount of capital invested and deals completed since Q4 2020.”
Why are investments in the sector plummeting?
PitchBook indicated that the estimated venture capital funds of $2.6 billion were raised through 353 investment rounds. This reveals that the number of funding rounds has also decreased by 12.2% in the first quarter. However, the analysis company identified the reasons behind the investment decline, citing regulatory ambiguity as a significant factor.
PitchBook also believes that the failures of crypto companies in 2022 played a role in the investment downturn. In this context, they mentioned the bankruptcy of the crypto exchange platform FTX. Additionally, investment in crypto is hindered by the lack of certainty regarding the benefits of many still-experimental projects.
While use cases and the number of users in the crypto sector have recently increased, the report highlighted, “It is unlikely that cryptocurrencies will be adopted by the general public until better regulations and guidelines are in place. The absence of clear regulation is a major concern for the sector and is considered a limiting factor. Government regulators, particularly 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 towards foreign jurisdictions.
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