Would investors be discouraged by the fall of cryptocurrencies? While companies in the ecosystem multiplied fundraising during the bull run of 2021, the trend seems to have reversed in the year 2022, when the sums raised fell by 42%. What can we learn from this data?
Falling funding compared to 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 gave way to greater vigilance and restraint on the part of investors. Indeed, funding fell by 42% between 2021 and 2022, from $37 billion to $21 billion.
This information, from the data aggregator DeFiLlama, shows us that a strong correlation exists between the price of Bitcoin (BTC) and the sums collected during the various rounds.
Thus, in the last quarter of 2021, when the Bitcoin price touched $68,000, the amounts of money obtained by companies were at their highest. : more than 17 billion dollars had been raised in the last three months of 2021, i.e. the equivalent of 4/5 of the 21 billion dollars raised during the whole of 2022.
Figure 1 – Monthly funding in the cryptocurrency sector between 2021 and 2022
Still following this correlation, we can note the slow drop 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 fell from $47,000 to $16,000: investor interest therefore follows the performance of the queen of cryptocurrencies.
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Investments don’t know the crypto winter
Despite the fall in prices and the pessimistic rhetoric that resulted from it, investors are far from having abandoned ship. Referring to amounts raised in 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
During the previous cycle, after reaching a total of 3.3 billion dollars raised in March 2018 aloneinvestments declined until March 2019, when only $190 million had been raised.
Regarding the current cycle, while the funding record stands at 7 billion dollars for the month of November 2021fundraising gradually reduced over the following year: in November 2022, fundraising had accumulated $1.13 billion.
Furthermore, despite the cryptocurrency market capitalization increasing from $3 trillion to $800 billion, the financing carried out in 2022 remains well above that of previous years, 2018 included. Now, it remains to be seen whether investors will still be there in 2023.
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Source: Figure 1 and 2 – DeFiLlama
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Always enthusiastic about new technologies, I gradually moved closer to Web3-related activities during the year 2021. Over time, I wanted to add my stone to the building. It was then that I became an editor, with the aim of explaining cryptocurrency-related topics to as many people as possible.
Timothy Bourbotte
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