The amount of venture capital pumped into crypto companies globally tumbled sharply again in the first quarter of the year, as investors continue to flee the market amid a deep ‘winter’.
New data has revealed that crypto firms raised just $2.6bn in venture capital in the three months to March, down 11 per cent on the final three months of 2022.
Meanwhile, while the number of deals fell beyond 12 per cent, according to the data from investment analysis firm Pitchbook.
The sector has been gripped by a so-called crypto winter over the past year as rising interest rates and a string of high profile bankruptcies spook investors. More than $1trillion dollars was wiped from the value of the market last year, according to CoinMarketCap, though flagship currency Bitcoin has enjoyed a stronger start to 2023.
Analysts at Pitchbook said the implosion of firms like FTX and a lack of regulation were still fuelling uncertainty and hampering investment into the space.
“The collapse of several crypto companies in 2022 serves as a reminder that significant challenges still exist. Mainstream adoption of crypto is unlikely to occur until better regulations and guidelines are in place,” they said.
“The lack of clear regulation is a major concern for the industry and is seen as a limiting factor. Governmental regulators, particularly in the US, tend to be reactive rather than proactive.”
Lawmakers in the UK are moving to give regulators power to draw up rules for the sector, with rules likely to come in later this year.
Pitchbook said firmer rules may see some confidence return among venture investors.
“Yet the crypto industry is still in its early stages, and there is a lot of room for growth and Innovation,” the analysts said.
“Overall, the crypto market is not without risks and challenges, but with greater focus on safety, security, and valuable use cases, along with prudent legislation, it has the potential to bring significant benefits to consumers, businesses, and other institutions.”