Cryptocurrency venture funding drops by 63% ahead of the FTX trial.

Oct 11
During the criminal prosecution of FTX co-founder Sam Bankman-Fried, venture capitalists have come under increased scrutiny for their role in fostering the cryptocurrency industry. However, recent evidence indicates that these investors have sharply pulled back from the sector they previously helped to develop and promote.
According to analytics firm PitchBook, global venture funding for cryptocurrency businesses dropped 63% in the third quarter compared to the same period in 2018, reaching its lowest level since 2020.

Only a small portion of the money venture capitalists invested during the bitcoin boom, $2 billion, was invested in cryptocurrencies throughout the quarter.

Big acquisitions are less frequent now, according to PitchBook analyst Robert Le. Deals are becoming smaller, and that is one of the causes of the drop.

Companies like Exchange FTX, non-fungible token marketplace OpenSea, and NFT developer Yuga Labs once benefited from massive fundraises during the bitcoin bull market. Companies that are already making cost cuts and layoffs may now face challenging decisions as a result of the withdrawal of venture capital.

Le predicted that if they are unable to raise a round, they will either file for bankruptcy or be bought out for a far cheaper price.

Although early-stage companies can still engage in Bitcoin transactions, many late-stage tech investors have left the market entirely, according to him.

FTX and Alameda stock are regarded as some of the most valuable assets of businesses going through bankruptcy. The possibility of a new fundraising round has even given the creditors of the cryptocurrency exchange hope that they will be fully recovered through a prospective share sale. FTX invested in the artificial intelligence firm Anthropic.

Le cautioned that if many shares of different companies are sold at a discount during a major liquidation sale, it could result in a further decline in the value of Bitcoin startups.
The size of FTX and Alameda's holdings, he said, "could further depress valuations in this space."

Created with