The big bankruptcies and scandals of 2022 didn't occur in the crypto industry this year. But the industry is still suffering badly from the aftermath.
A year after the bankruptcy of the US crypto exchange FTX, initially led by Sam Bankman-Fried, there's still a deep «crypto winter» for raising capital in the cryptocurrency sector, according to a recent study by blockchain research firm Messari.
The bear market is reflected primarily in the industry's fundraising data. The third quarter «was no exception to the multi-quarter downward trend we've witnessed since the beginning of 2022.» The third quarter marked new lows in both total funding amounts and deal counts, Messari's said in its latest report, «State of Crypto Fundraising.» These are the weakest numbers since the final quarter of 2020.
Another Sharp Decline
As a result, the industry recorded slightly less than $2.1 billion across just under 300 deals, representing a 36 percent decline from the previous quarter. Most deals were early-stage financings, with seed funding accounting for $488 million. Later-stage deals, which Messari defines as Series B or later, declined to 1.4 percent from an 8 percent share in the fourth quarter of 2020.
This indicates strategic positioning in the downturn, the study's authors said. They say investors sought to fund projects with asymmetric upside that could achieve higher multiples when market sentiment eventually moved positively.
The Sectors in Demand
The distribution of sector funding followed a similar pattern to the past 12 months. Blockchain infrastructure, DeFi, and gaming were consistently the best-funded sectors during this period.
The services sector, defined by complementary business functions such as marketing, incubators, security, and legal services, was the only other sector to receive more than $100 million in funding on average over the past twelve months.
