Venture capital funding within the cryptocurrency sphere is undergoing a significant downturn as market ambiguities intensify. June witnessed a sharp fall of almost 30%, securing only $779.32 million across 62 distinct deals, according to Cointelegraph Research Venture Capital Database.
This decline correlates with a larger context of global economic ambiguity, featuring uncertainties such as geopolitical shifts and worldwide efforts to contain rampant inflation.
Shrinking confidence amid market volatility
Despite the U.S Federal Reserve’s pause on interest rate hikes in June, the risk-averse sentiment among investors remained prevalent, leading to a break in the progressive growth trend observed over the preceding months.
Nevertheless, this should not be misconstrued as a bearish signal. The trajectory for 2023 continues to ascend, driven by encouraging developments like the introduction of Bitcoin ETF applications by powerhouses like BlackRock, VanEck, WisdomTree, and Fidelity, as well as Ripple’s legal triumph over the SEC.
These events prompted an immediate positive response within the crypto market, but venture capital investments have been slower to react due to their innate cautious nature.
Furthermore, the rate of VC activity may also be influenced by the unpredictability of global economic circumstances, adding another layer of caution to the mix.
Investment focus: A steady landscape
Data from the Cointelegraph Research Venture Capital Database reveals a stable investment landscape, with no significant shifts in the deal breakdown for June.
Blockchain infrastructure continued to dominate the scene, accounting for 20 independent deals and attracting over $493 million in funding.
Meanwhile, decentralized finance (DeFi) staged a minor comeback, securing 20 deals and over $144 million in investments. On the other hand, Web3 seemed to lose some traction among venture capitalists in June, raising about $107 million over 18 deals.
Rounding up the list were centralized finance (CeFi) and nonfungible tokens (NFTs), each closing with roughly $32 million and $2 million in investments, respectively.
Islamic Coin’s $200 million funding round from Alpha Blue Ocean’s ABO Digital emerged as the most substantial deal in June. This initiative aims to devise a digital fiscal tool for Muslims worldwide, and its total funding has now exceeded $400 million.
Another notable mention is Gensyn, a blockchain-powered artificial intelligence project that connects compute power buyers and sellers. It attracted $43 million in a deal led by a16z Crypto, with participation from CoinFund, Canonical Crypto, and others.
While the previous months of March, April, and May saw venture capital funds increase their influx into the blockchain space, this trend faced a reversal in June.
This shift suggests potential hurdles on the horizon, yet sporadic fluctuations are less crucial than the overall trajectory, which remains on the rise.
With ripple effects from Bitcoin ETF filings and the Ripple-SEC lawsuit yet to fully permeate the crypto VC market, the upcoming months of July and August are set to provide some indicators.
Will it be the broader macroeconomic conditions or significant crypto market events that hold more sway? Only time will tell.
