Venture capitalist investment in cryptocurrency companies continued to decline in the first quarter of 2023, according to a new report and despite the current turmoil over cryptocurrency regulation in the U.S., the country still leads the way in terms of the number of companies raising capital.
The $2.4 billion invested by VCs in the first quarter of 2023 was the lowest since the last quarter of 2020, according to an April 11 report from Galaxy Research, the research arm of cryptocurrency investment firm Galaxy Digital. Venture funding has been on the decline since peaking at nearly $13 billion in the first quarter of 2022, with results in the most recent quarter down more than 80% compared with the same period last year.
The report noted that figures for venture deals are typically released at a later date, meaning the $2.4 billion figure cited could be revised in the future. Although capital investment has declined since the fourth quarter of 2022, the report states that the number of transactions has actually increased by nearly 20%, and theoretically, there is a clear correlation between cryptocurrency prices and capital investment, which may That would lead to a rebound in venture capital activity following strong price gains late in the first quarter. Despite various statistics and anecdotal evidence that crypto firms are leaving the U.S. for countries with clearer regulations and more tax-friendly policies, Galaxy found that in the first quarter of 2023, U.S.-based companies raised an inflow of cryptocurrencies. 42.8% of venture capital funding, followed by France at 19.4%.
Although Galaxy’s report covers investment jurisdictions from the third quarter of 2022, the U.S.’s share of cryptocurrency VC investment has only fallen by 2.8 percentage points since then. France appears to be the biggest winner, with capital investment in French crypto companies jumping to 19.4% in the most recent quarter from less than 5% in Q3 2022.
