A worrying new report reveals that there has been a significant decline in investments by venture capitalists (VCs) in the cryptocurrency sector over the course of October.
According to a report published by crypto and Web3 asset data provider RootData, there has been a 10% month-on-month decline in the number of crypto venture capital deals in October, with only 75 projects being publicly disclosed by crypto VCs compared to 83 projects in September. This also resulted in a 45% year-on-year decline as 135 projects received backing from VCs in October 2022.
Crypto VC Investment in October Falls To Record Low
The report classified the industry’s financing under four categories, namely centralized finance (CeFi), decentralized finance (DeFi), Infrastructure, non-fungible token (NFT) and Games, and Web3.
Last month, crypto and blockchain infrastructure projects (18) accounted for approximately 24% of the financing, followed by DeFi (16) at 21%, CeFi (7) at about 9%, and NFT and GameFi projects (10) at 13%.
The total dollar amount financed by crypto VCs in October stood at $430 million, which is a 20% MoM decline from September’s $530 million, and a staggering 63% YoY decrease from the $1.15 billion worth of investments made in crypto projects last October.
Several Crypto Projects Able To Raise Over $12 Million in October’s Funding Rounds
Despite the overall decline in investments, numerous crypto projects were able to raise over $12 million in funding rounds held last month.
Web3 security development company BlockAid leads the list after it secured a combined $33 million in financing, which included a $6 million seed round participated in by prominent VC firms Sequoia Capital, Greylock Partners, and Cyberstarts, and a $27 million Series A round led by Rabbit Capital and Variant.
BlockAid, founded in September 2022 by former members of the cybersecurity R&D team under the Israeli Military’s intelligence division, provides alerts to prevent phishing attacks on crypto wallets. The company recently partnered with crypto wallet provider MetaMask to integrate the security system onto its platform.
Another notable firm was BlackBird, which provides customer loyalty and connectivity tools for restaurants. The company helps users earn access rights, rewards, privileges, and FLY loyalty points every time they check in through its platform. BlackBird announced the completion of a $24 million Series A funding round led by a16z.
Decentralized derivatives exchange SynFutures raised $22 million in a Series B funding round led by Pantera Capital and participated in by HashKey Capital. SynFutures is currently the second-largest derivatives protocol on the Polygon (MATIC) network. Its CEO Rachel Lin also revealed plans to launch the platform’s own native token in the near future.
Membrane Labs, a cryptocurrency trading and lending platform secured $20 million in its Series A financing round that was participated in by some notable VCs, including Brevan Howard Digital and Point72 Ventures.
Crypto gaming company NEON Machine announced the completion of a $20 million financing round led by Polychain Capital and IOSG Ventures. The company is set to launch a new blockchain-based shooting game called ‘Shrapnel’, with a paid early access version to be released in December and a free public test version of the game slated for August 2024.
Real-world assets (RWA) lending platform Untangled Finance raised $13.5 million in a funding round led by Fasanara Capital. The platform is said to be launched on the Celo (CELO) network, with plans to expand support to Ethereum and Polygon blockchains through Chainlink’s (LINK) cross-chain interoperability protocol.
Crypto infrastructure startup smlXL announced the completion of a $13.4 million seed funding round that was led by a16z and Greylock, among others. The raised funds will be used to establish a development team and launch products such as codes and storage for Ethereum Virtual Machines (EVM) and verified and unverified Solidity smart contracts. According to smlXL founder Dor Levi, its products are aimed at developers and more experienced blockchain users.
Meanwhile, the decentralized autonomous organization (DAO) of popular DeFi exchange Uniswap passed the proposal to invest in the Ekubo Protocol, a leading crypto exchange on Starknet (STRK). Uniswap has invested 3 million UNI, worth approximately $12 million, in the platform in exchange for 20% of its governance tokens. Ekubo’s founder, Moody Salem, was a former engineering manager at Uniswap.
Leading centralized crypto exchange Binance announced the release of the 39th new crypto token through its Launchpad called Memecoin (MEME). The token, which will be listed on November 3, is the ecosystem asset of Memeland. Its creators raised approximately 8,737 ETH, worth about $15.67 million, in a pre-sale.
Investor Confidence in Crypto On The Rise Despite Low VC Funding
The major decline in venture capital funding raises some critical questions about the future growth prospects of the crypto industry. But as of late, investor sentiment has started to improve, which is evident from the increase in digital asset fund inflows. Last week saw a record $326 million in net inflow in the crypto market, marking the largest single week of inflows since July 2022.
The growing investor interest in the sector can be attributed to the potential approval of a Bitcoin exchange-traded fund (ETF) for the spot market by the US Securities and Exchange Commission (SEC).
In a recent report, crypto investment firm CoinShares stated that month-to-date inflows are closing in on the $500 billion mark, which is a clear indication of an increase in investor confidence.