Key Takeaways
- The cryptocurrency industry raised $2.1 billion via 297 rounds of funding in the third quarter of 2023—the lowest amount raised since the final quarter of 2020.
- Crypto industry fundraising peaked at more than $15 billion in the first quarter of 2022.
- Sectors of the crypto industry experiencing the most fundraising activity in the third quarter 2023 were blockchain infrastructure and decentralized finance (DeFi).
- Binance Labs was the most active investor during the latest quarter, with more than double the number of deals of the next-closest competitor.
- Interest in crypto has waned amid regulatory uncertainty and criminal charges for some of the biggest names from the last crypto bull market, such as Sam Bankman-Fried.
A report released by crypto intelligence firm Messari on Thursday showed a continuing downtrend in crypto industry funding in the face of regulatory uncertainty in the U.S. and the opening of the criminal trial of FTX founder and former CEO Sam Bankman-Fried.
Although Bitcoin’s price is up more than 60% on the year, the 36% drop in crypto industry fundraising from the second quarter to the third in 2023 is a clear indication that the crypto bear market hasn’t ended. It’s a continuation of a downward trend that started following a peak of more than $15 billion in fundraising in the first quarter of 2022.
The total amount raised in the latest quarter, at about $2.1 billion, is the least since the fourth quarter of 2020, the Messari report said. In addition, the 297 fundraising deals made in the crypto industry in the quarter were the fewest since the fourth quarter of 2020.
Blockchain infrastructure was the sector receiving the largest amount of funding overall at 18% of the total amount raised, while the decentralized finance, or DeFi, sector posted the most activity with 67 deals closed.
More specifically, proposed scaling solutions received 43% of the money raised by blockchain infrastructure projects. For the DeFi sector, exchanges nailed down both the largest number of deals and most money raised. The activity in these two sectors has been a trend for the past year, in addition to money flowing to the gaming and services sectors.
Binance Labs was the most active crypto industry investor in the third quarter of 2023, with 23 deals made. Its main focus for crypto industry investments has been DeFi, gaming, and projects focusing on zero-knowledge and privacy-focused technologies.
Binance Labs accounted for more than double the number of deals closed by the next-closest investor. That said, the top 10 investors in the latest quarter accounted for just 7% of all crypto industry fundraising deals, which points to a large amount of diversity in terms of sources of funding.
Crypto Bear Market Loomed Over Third-Quarter Fundraising
Reasons for the uninterrupted crypto bear market range from regulatory uncertainty in the U.S. to a general drop in interest in the industry after the collapse of crypto exchange FTX and other platforms.
A number of major crypto exchanges and projects, such as Binance and Coinbase, have been subject to lawsuits by the U.S. Securities and Exchange Commission this year. Now, the criminal trial of FTX founder Sam Bankman-Fried on charges of fraud and conspiracy has begun. At the same time, Congress is considering legislation with new regulations for the crypto industry.
