By George Ward
Crypto venture capitalists invested $121 billion in crypto start-ups so far this year, but only $32 billion has been used by crypto start-ups, per multiple reports. The challenge facing crypto funding isn’t the lack of funds but the slow rate at which it is deployed.
Furthermore, in Q2 of 2022, venture capital investors invested more than $8 billion compared to the $5.5 billion they invested in Q3. The decline of the financing for the second half of the year may cause an extension in the slowdown of the crypto market, says Galaxy Digital, a digital asset management firm.
Crypto Venture Funding Drops In Q3
Researchers at Galaxy said, “due to the turbulent condition of the crypto market in May and June, venture funds will likely push their fundraising investments to Q4. They hope that the market will have recalibrated by then.”
Galaxy made the report known in its Q3 2022 crypto funding update, released on Friday. Compared to 2021, fewer venture funds launched in 2022, according to Galaxy’s second-quarter report.
Previously in 2021, there were a total of 999 venture funds focused on the crypto market. More importantly, the third quarter of 2022 saw an 80% drop in venture capital funding as venture capital investors put $5.5 billion into crypto start-ups.
In addition, Q2 witnessed below-average pre-seed deals compared to the first quarter. The drop spread into Q3 and has now reached its lowest in funding for the year so far.
The crypto market volatility may also be a reason why capital deployment is slow. According to TechCrunch, as of mid-October this year, New Form Capital — a crypto-focused venture, only allotted around 30% of its $75 million funds.
Alongside this, BlackTower Capital has only used $20 million of its $150 million funds. Galaxy also reported a lag for venture funds but said that the bearish condition of the market is having a more significant impact on the allocation decisions.
However, Galaxy said, “In a more stable market than the current market, the lag won’t have any effect on the allocator’s ongoing investment.” Galaxy was referring to the allocator’s investment concerning liquid assets, like stocks and fixed-income products, that dropped in the last six months.