Crypto Venture Funding Rebounds in 2023 Amid Market Resurgence

In 2023, the crypto market witnessed a significant resurgence, leading to a renewed interest from venture investors.

According to PitchBook, venture funding for crypto-related enterprises in the fourth quarter of 2023 reached $1.9 billion, reflecting a 2.5% increase compared to the previous quarter. This marks a notable turnaround, representing the first uptick in VC investments in crypto startups since the first quarter of 2022.

For crypto entrepreneurs, this rebound comes as a relief after enduring the challenges of the "crypto winter" in recent years, which made fundraising a daunting task. The downturn in venture funding for crypto firms in 2022 was exacerbated by a shift in investor sentiment away from riskier assets, including tech stocks and cryptocurrencies, prompted by rising interest rates from major central banks.

Furthermore, setbacks such as the collapses of prominent crypto companies like Terra's algorithmic stablecoin and FTX contributed to the overall decline in investor confidence. Venture funds such as Andreessen Horowitz, Sequoia Capital, and Tiger Global felt the impact, with some even having to write off their entire investments in certain cases.

However, there's now a noticeable shift in sentiment among investors, as indicated by an increase in funding activity. Cathy Le, in an interview with CNBC, noted that investors have become more active in writing checks for crypto ventures, aligning with the positive trends seen in the data.

Le attributed the rebound in crypto venture funding to the resurgence in crypto asset prices and the soaring valuations of publicly traded crypto-related companies like Coinbase, Marathon Digital, and MicroStrategy. Over the past year, the price of bitcoin has more than doubled, surpassing $52,000 per coin, while Coinbase stock has surged by nearly 140% year-over-year.

The correlation between investments in private and public markets is evident, according to Le. This trend suggests that the overall sentiment towards crypto-related investments is turning bullish, both in private funding rounds and public market valuations.

Despite a slight decline in the number of deals in the fourth quarter, Le explained that this indicates a concentration of capital towards the strongest startups in the crypto space. Noteworthy sectors attracting funding include finance and technology solutions, particularly those focused on tokenization of real-world assets and decentralized computing infrastructure.

Some significant fundraises during the quarter include Swan Bitcoin and, which raised $165 million and $100 million respectively. The largest deal of the quarter was a $225 million investment in Wormhole, an open-source blockchain development platform, backed by notable investors like Coinbase Ventures and Jump Trading.

Moreover, the wave of interest in crypto from financial institutions, triggered by the launch of the first spot bitcoin exchange-traded funds (ETFs) in the U.S. late last year, has further fueled investment activity. Le anticipates a significant influx of passive money into bitcoin from institutional investors who were previously hesitant to invest in the cryptocurrency.

Overall, the resurgence of venture funding in the crypto space signals a renewed optimism among investors, driven by favorable market conditions and increased institutional interest in digital assets.