Crypto Venture Capital Inflows Decline as External Factors Impact Investments
In July, venture capitalists witnessed a 10.26% decrease in capital inflows, raising only $700 million, according to data from Cointelegraph Research VC Database. The recent downward trend can be attributed to macroeconomic conditions, such as the United States Federal Reserve rate hikes and geopolitical events, which are significantly influencing the decision-making process of VCs.
Despite the challenging climate, some firms are opting for a risk-off approach, while others are selectively deploying capital towards value investments. VCs are now diligently analyzing each project to identify potential opportunities, preferring to follow the lead of established investors rather than taking unnecessary risks.
However, the crypto VC sector isn’t entirely bleak. Polychain Capital launched Investment Fund IV, raising $200 million, and CoinFund launched Seed Fund IV, raising $152 million in July. These examples are outliers in the current environment. In comparison, June only witnessed three crypto funds emerge, raising less than $100 million collectively.
The possibility of spot Bitcoin (BTC) exchange-traded funds (ETFs) receiving approval in the U.S. has generated substantial excitement. If approved by the SEC, it could rejuvenate the industry and trigger the next crypto bull run. The approval would serve as a positive signal for crypto VCs, attracting more attention and capital. However, it remains to be seen if this potential development will reverse the current investment trend.
Infrastructure and Web3 Lead the Way
The Web3 sector continues to be highly active, with July witnessing 26 individual deals that raised $256.2 million. Infrastructure investments have consistently attracted significant capital inflows, with $279 million raised across 24 deals in July. Decentralized finance followed with $140.1 million invested in 19 deals, while centralized finance and nonfungible tokens (NFTs) trailed behind.
In July, Polygon and Binance Labs participated in four investment rounds. Notably, projects like 0xBoost Finance, Aethir, Dappos, and Delabs Games secured investments from prominent firms such as Polygon, Binance Labs, and HashKey Capital.
However, these projects do not top the list of highest fundraisers. Web3 startup Zyber 365 takes the lead with a Series A round of $100 million, making it a fintech unicorn worth over $1.2 billion. The funds will primarily support global expansion.
Flashbots, an infrastructure solution provider aiming to mitigate the negative impact of maximal extractable value on the Ethereum blockchain, closed a Series B round of $60 million with support from Sanctor Capital, HashKey, Animoca, and others. Futureverse, an AI metaverse startup, raised $54 million in a Series A round led by 10T Holdings and Ripple. Futureverse combines 11 startups from various domains, including blockchain, AI, NFTs, and gaming, with the aim of expanding its ecosystem.
The positive trend observed previously has not continued in July, with investments declining further. Investor activity remains subdued, and although the sentiment towards Bitcoin and Ether (ETH) ETF approval in Europe and the U.S. may impact the VC landscape, a rapid return to a consistent upward trend in the blockchain industry appears unlikely.
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