Venture capital funding for cryptocurrency projects exceeded $21 billion in 2022, surpassing all other years recorded beyond 2021. According to new data compiled by CoinGecko, there has been a gradual quarter-over-quarter decline in funding with the worsening of the 2022 crypto crash, but the year’s total was actually 84% of the total amount raised in 2018, 2019, and 2020 combined. If anything, this suggests that the current bear market is actually not as bad as it is often portrayed, and that it is likely to be much milder than previous declines, even with the collapse of FTX and other similar failures.
Not only does the latest funding data reveal an ongoing interest in cryptocurrencies by the broader global economy, but also other recent data and news. From the adoption of NFTs by fashion brands to banks opening crypto services and central banks piloting CBDCs, there is no shortage of evidence indicating that crypto continues to grow. And by extension, it indicates that when the next bull market arrives, it could be even bigger than previous cycles.
Crypto funding continues despite 2022 cryptocurrency crash
2022 got off to a promising start, with its first quarter raising $8.7 billion, the third highest amount in the short history of cryptocurrencies, behind Q3 2021 and Q4 2021. Its second quarter was also pretty good at $5.9 billion, making it the cryptocurrency’s fifth-largest quarter for VC funding.
Of course, things went downhill from there, soured by the collapse of Terra in May, worsening macroeconomic problems, and then the failure of FTX in November. The fact is, as disappointing as Q3 and Q4 2022 were from a funding perspective, each still raised more than each quarter in 2019 and 2020, as well as more than Q3 and Q4 2018.
So even though 2022
raised 42% less money for crypto projects than 2021, it was still a strong year compared to crypto history, despite last year’s bear market. This testifies to how big the industry has already become and how big it could become in the not-too-distant future.
In fact, even after the FTX and BlockFi bankruptcies, various cryptocurrency companies continue to raise new funding even now. Here are just a few examples from the last two months:
Social NFT platform Revel raised $7.8 million from Dragonfly Capital.
Trading firm Amber raised $300 million in mid-December from Fenbushi Capital US and other investors.
Keyrock raised $72 million in early December from Ripple, SIX Fintech Ventures and Middlegame Ventures.
NFT startup Metagood raised $5 million in early December.
Decentralized identity provider Carv raised $4 million at the end of November.
NFT fraud detection platform Yakoa secured $4.8 million in funding in mid-November from Collab + Currency, Volt Capital and Brevan Howard Digital.
Game developer Web3 Wemade raised $46 million from Microsoft in early November.
This list of funding rounds for crypto companies does not include acquisitions (e.g. the purchase of Cobalt by United Fintech), but it still shows that the industry is not struggling as much as some might think of attracting outside money.
Adoptions, pilots and trials continue at a fast pace
The above is not the
only sign that the cryptocurrency crash of 2022 is not as severe as previous recessions. Supporting this suspicion is also the fact that many large companies and institutions continue to deepen their involvement with cryptocurrencies in one way or another.
For one, let’s take a look at the major banks and financial services companies that have recently announced plans, services, or implementations related to cryptocurrencies in recent months. Notably, December revealed that Goldman Sachs is now using the post-FTX fallout as an opportunity to acquire various cheap cryptocurrency companies, with the firm’s head of digital assets, Mathew McDermott, telling Reuters: “We see some really interesting opportunities, at much more reasonable prices.”
In October, BNY Mellon – one of the oldest surviving banks in the world – announced that it would offer cryptocurrency investment services, joining an already large enough list of US and international banks to offer similar services.
A little more recently, Mastercard launched a Web3 incubator in partnership with Polygon in early January, with the goal of training artists and musicians to use Web3-related tools to connect with fans and make their work more financially sustainable. Its main rival, Visa, has also been working on crypto in various ways, with its researchers publishing a technical paper in December on how it could automate recurring payments from self-custodial cryptocurrency wallets.
In addition to the financial sector, other sectors are also doing more with cryptocurrencies, even with the continuing recession. This is especially true in fashion, which seems to fall on itself to do things with NFT and Web3. Already illustrious fashion houses such as Gucci, Balmain, Prada, Paco Rabanne, Guerlain, Phillip Plein and Louis Vuitton (among others) have launched collections that provide consumers with non-fungible tokens to match their real-world clothes, highlighting the potential of cryptocurrencies to create new ownership dynamics within fashion.
Something similar can also be said for the art world, with 2022 even announcing the opening of some of the world’s first NFT-based galleries (e.g. in London and Australia). The year also saw more than a few bands release their albums as NFT, with the rock band Muse becoming the first act topped the UK album charts with an album based on the NFT in September.
In fact, it’s not just industries, with the United Nations Refugee Agency (UNHCR) working with the Stellar Development Foundation in December to pilot the use of blockchain technology for the delivery of financial aid to people in Ukraine.
The Next Bull Market
All this shows that the potential of crypto and blockchain remains enormous. Not only that, but with so many companies, banks, and institutions moving to produce something related to cryptocurrencies and digital currencies (e.g. all central banks using or planning CBDCs), the groundwork has been laid for a very large bull market next time. That’s because the next time retail and institutional investors experience a widespread desire to buy or use cryptocurrencies, there will already be so many platforms and companies ready to provide them.
Of course, just when this bull market arrives is guessed, although with Bitcoin’s next halving expected next year and economic conditions slowly improving in some parts of the world, it may not be that far off.