In the first quarter of 2023, global capital markets data platform PitchBook released a report revealing that crypto-focused companies raised $2.6 billion across 353 investment rounds. The amount raised signaled a decrease in the total number of deals and deal value, with a 12.2% and 11% drop, respectively, quarter-on-quarter. It represented the fourth consecutive quarter of decreasing investment activity and the lowest capital invested and deals completed since Q4 2020. Despite this, the report showed positive outlooks for the crypto space.
Crypto Investment Activity in Q1 2023
The PitchBook crypto report disclosed that valuation trends were mixed, with seed, late, and early-stage rounds at different levels for the quarter. Seed and late-stage rounds were up 33.3% and 209% compared to 2022, respectively, while early-stage rounds slumped by 16.7%.
Declining Investment Activity
The $2.6 billion raised by startups across 353 deals represented a decline of 78% and 64.4% from last year, respectively. The report demonstrates that while the 2022 crypto winter persists, venture capital firms have been able to close many deals and make significant investments in the crypto space. PitchBook predicted that the decline might likely continue, but the firm mentioned some positive incidents in the space in Q1 2023.
L2s Continue to Attract Investments
Layer-2 (L2) scaling solutions continued their momentum from 2022 by attracting more investments. Blockstream, a Bitcoin scaling platform, raised a $125 million convertible note and debt round for building a Bitcoin mining infrastructure. The project had previously secured $163 million in a Series B funding round in August 2022.
Furthermore, Scroll, a company building a zero-knowledge Ethereum Virtual Machine (zkEVM) scaling solution, raised $50 million in a late-stage funding round.
Crypto Custodial Services Also Received Notable Investments
Crypto custodial services also received notable investments as demand for self-custody increased. Hardware wallet manufacturer Ledger secured $109 million in a Series C extension funding round to optimize and expand its wallet production. The French hardware company, which is behind wallets like Nano S and Nano X, intends to conduct two more rounds before the end of the year.
Swiss crypto firm Taurus also raised $65 million in a Series B round led by notable monetary institutions, including Credit Suisse and Deutsche Bank, to improve its platform and expand internationally.
Despite declining investment activity in the crypto space for the fourth consecutive quarter, Q1 2023 showed positive outlooks. Layer-2 scaling solutions and crypto custodial services received notable investments, demonstrating the continued interest of venture capital firms in the crypto space. PitchBook predicted that the decline might likely continue, but some positive incidents in the space in Q1 2023 provide hope for future investment activity.
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