Would investors be discouraged by the fall of cryptocurrencies? While companies in the ecosystem were raising money during the bull run of 2021, the trend seems to have reversed in 2022, when the amount of money raised fell by 42%. What can we learn from this data?
Funding down on 2022
While 2022 was marked by falling prices and the collapse of the biggest players in the cryptocurrency ecosystem, the euphoria of the previous year has given way to more vigilance and restraint on the part of investors. Indeed, funding has fallen by 42% between 2021 and 2022, from $37 billion to $21 billion.
This information, from data aggregator DeFiLlama, shows us that there is a strong correlation between the price of Bitcoin (BTC) and the amount of money raised in the various funding rounds.
For example, in the last quarter of 2021, when the Bitcoin price hit $68,000, the amount of money raised by companies was at its highest: more than $17 billion had been raised in the last three months of 2021, equivalent to 4/5 of the $21 billion raised in the whole of 2022.
Figure 1 – Monthly funding in the cryptocurrency sector between 2021 and 2022
Also following this correlation, we can note the slow fall in funding between the first and last quarter of 2022, from $8.7 billion to $3 billion respectively. At the same time, the price of Bitcoin has fallen from $47,000 to $16,000, so investor interest is tracking the performance of the queen of cryptocurrencies.
Investment doesn’t know crypto winter
Despite the fall in prices and the resulting pessimistic talk, investors are far from having abandoned ship. Referring to the sums raised during the previous cryptocurrency market cycle, we notice a significant difference between the investments made following the bull market of 2017-2018, and those made in 2022:
Figure 2 – Monthly funding in the cryptocurrency sector between 2021 and 2022
In the previous cycle, after reaching a total of $3.3 billion raised in March 2018 alone, investments declined until March 2019, when only $190 million was raised.
Regarding the current cycle, while the funding record stands at $7 billion in the month of November 2021, fundraising has been progressively reduced over the following year: by November 2022, rounds have accumulated $1.13 billion.
Furthermore, despite the cryptocurrency market capitalisation having fallen from $3 trillion to $800 billion, the funding raised in 2022 remains well above previous years, 2018 included. Now it remains to be seen whether investors will still be there in 2023.
