Venture Capital Interest in Crypto Market Declines Amidst Bear Market and AI Hype
The crypto market has experienced a significant decline in venture capital (VC) interest, with funding dropping by 63% due to the bear market and rising interest in artificial intelligence (AI).
Crypto Funding Woes Continue in Q3 2023
According to Bloomberg, VCs invested only $1.9 billion in crypto firms throughout the third quarter of 2023. This represents a 63% decrease compared to the same period in 2022.
PitchBook analyst Robert Le suggests that the decline is due to smaller deals rather than large investments. He expresses concern that crypto companies may leave the industry if they fail to raise new funds, either going out of business or being acquired at much lower valuations.
Examples of this trend include Everledger, an Australian blockchain-based startup that wrapped up operations due to a lack of funding, and Chainalysis, a blockchain data firm that laid off 15% of its staff citing market conditions.
AI Hype Stealing Limelight From Crypto
In addition to the bear market, VCs have also been diverting their attention away from crypto investments due to the hype surrounding AI. SoftBank, a Japanese investment giant, has been aggressively investing in AI startups instead of focusing on crypto.
Other companies and individuals are also shifting their preference towards AI. Disney, for example, launched a dedicated task force for AI after moving on from its metaverse ambitions. Jaynti Kanani, co-founder of Polygon, announced his departure from day-to-day operations to work on a new AI startup.
Hot Take: The Future of Crypto VC Funding
While VC interest in the crypto market has declined, some investment firms still maintain a long-term vision for the ecosystem. Blockchain Capital, a crypto VC company, recently raised $580 million to invest in six crypto sectors.
Furthermore, there is hope for a new bull market and fresh VC funding with the upcoming Bitcoin halving. As the market conditions improve, it is possible that venture capital interest in the crypto space will rebound.
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