NEW YORK / LONDON (IT BOLTWISE) – Investments in crypto-focused venture capital firms reached $4.65 billion in the third quarter. This is the second highest activity since the collapse of crypto exchange FTX in late 2022, which severely impacted investment in the industry. Despite the challenges, interest remains in sectors such as stablecoins, AI and blockchain infrastructure.
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Investments by venture capital firms in the crypto sector reached a volume of $4.65 billion in the third quarter of 2023. This represents the second highest activity since the collapse of crypto exchange FTX in late 2022, which severely impacted investment in the industry. According to a report from Alex Thorn, head of research at Galaxy Digital, investments increased by 290% compared to the previous quarter, reaching the highest level since the first quarter, in which $4.8 billion was invested.
Although investment is still below 2021-2022 bull market levels, overall activity remains brisk and healthy. In particular, sectors such as stablecoins, AI, blockchain infrastructure and trading continue to attract investments. Activity in the pre-seed space also remains constant, although the share of such deals compared to the total number of investments is declining as the industry matures and traditional players increasingly enter the crypto market.
There were 414 venture deals closed in the third quarter, with seven of those deals accounting for half of total capital. The largest deals included investments in fintech company Revolut at $1 billion, crypto exchange Kraken at $500 million and crypto-focused US bank Erebor at $250 million. Interestingly, most funds were invested in companies founded in 2018, while companies founded in 2024 recorded the highest number of deals.
Another factor impacting venture capital activity is competition from AI startups for investment capital, as well as rising interest rates that make investing less attractive overall. Additionally, spot ETPs and digital asset treasury firms could reduce investor interest in crypto, as large investors such as pension funds and hedge funds may enter the sector through these large, liquid vehicles rather than investing in early-stage VC investments.
Crypto venture capital activity was highest in the US, with 47% of invested capital flowing into US-based companies. This compares to 28% in the UK and 3.8% in Singapore. The US also accounted for 40% of deals closed, followed by Singapore at 7.3% and the UK at 6.8%. Despite a previously hostile regulatory environment, the US has historically seen the most deals and capital invested, and this trend is expected to continue under the crypto-friendly Trump administration.
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