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Crypto & Blockchain Funding 2023: In-Depth Report on Investments in Web3

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Crypto & Blockchain Funding 2023: In-Depth Report on Investments in Web3

In Q3 2023, the crypto and blockchain sector experienced a notable decline with just $1.975 billion in investment, making the lowest point since Q4 2020 and establishing a new cycle low. This ongoing downtrend commenced after a peak of $12 billion in Q1 2022. 

Presently, there is a pressing need for a comprehensive analysis to comprehend the current state of funding in Web 3, blockchain, and crypto. 

This report delves deeply into the intricacies of the Web 3 funding landscape to provide a thorough understanding of the prevailing situation.

The chart reveals a nuanced funding landscape for VC-backed Web3 startups.

Quarter  Total $ Invested  Number Deals 
Quarter 2, 2021 $5.8B 549
Quarter 3, 2021 $6.9B 524
Quarter 4, 2021 $9.8B 717
Quarter 1, 2022 $8.3B 797
Quarter 2, 2022 $7.5B 659
Quarter 3, 2022 $3.4B 507
Quarter 4, 2022 $2.5B 424
Quarter 1, 2023 $1.8B 418
Quarter 2, 2023 $1.8B 322

The market demonstrated maturation in the initial quarters of 2021, stabilizing later in H2, 2022, and H1, 2023, reflecting potential market consolidation with reduced funding and deals, urging a cautious approach. Despite fluctuations in funding amounts, the number of deals remained resilient, indicating a diverse and dynamic market. 

The Web3 sector exhibited robust growth in Q2 2021, with $5.8B invested across 549 deals. This positive trajectory continued into Q3 2021, reaching $6.9B across 524 deals. Q4, 2021 witnessed a significant spike, hitting $9.8B with 717 deals, showcasing remarkable expansion. 

However, Q1 2022 experienced a slight dip in funding to $8.3B, accompanied by an increase in deals, signaling market diversification. Q2, 2022, saw another dip to $7.5B but maintained a steady deal flow at 659, suggesting a period of consolidation. 

The following quarters, Q3 and Q4 2022, witnessed substantial drops to $3.4B and $2.5B, respectively, raising concerns about market contraction. Q1 and Q2, 2023, continued this downward trend, with funding at less than $1.8B in both quarters, emphasizing a challenging start to the year, alongside a decrease in deals to 418 and 322, respectively.

1.2. Web 3 Funding: Half-Year Comparisons

The second half of 2021 showcased impressive growth, reaching 16.7B and 1,241 deals, reflecting heightened investor confidence. H1, 2022, sustained this momentum at $15.8B despite a slight dip, indicating a maturing market. However, H2 2022 witnessed a sharp decline to $5.9B and 931 deals, suggesting a potential correction in the market. The challenging trend continued into H1, 2023, with only $3.6B invested and 740 deals, signaling a significant downturn.  

2. Crypto Hedge Fund Landscape 2023: An Analysis 

As per the 5th Annual Global Crypto Hedge Fund report, 29% of hedge funds are investing in cryptocurrencies, a decrease from 37% in 2022. The industry seems to be re-evaluating the role of crypto-assets in portfolios, influenced by events like company or project collapses. 

2.1. Analysis of Hedge Fund Investments in Crypto Assets: AUM Distribution

The chart clearly shows hedge fund allocation to crypto-assets based on the percentage of their total Assets Under Management (AUM). 

AUM Percentage Range  Percentage of Hedge Funds 
Less than 1% 24%
1% – 2% 23%
2% – 5% 15%
5% – 10% 15%
10% – 20% 15%
20% – 50% 8%

The chart data underscores a diverse landscape within hedge fund crypto investments, reflecting a blend of caution, experimentation, and increasing confidence.  

Notably, a significant portion of hedge funds (24%) maintains a conservative approach, investing less than 1% of their AUM in crypto. This cautious stance aligns with the overall volatility and risk of the cryptocurrency market.

Interestingly, around half of the hedge funds involved in crypto-assets exhibit a ‘toe-hold’ strategy, committing less than 2% of their total AUM. Strikingly, 63% of these funds boast AUM exceeding $1 billion, indicating that even prominent players are cautiously testing the waters in the crypto space.

Conversely, 38% of hedge funds actively engaged in crypto-assets display a high-risk appetite, allocating over 5% of their AUM. This marks a significant increase from the previous year’s 20%, signaling growing confidence or willingness to embrace larger positions in the crypto market

2.2. Why Hedge Funds Invest in Crypto: Top Reasons 

Hedge funds invest in crypto-assets for various reasons. The top three are: 

Reasons for Investing  Percentage 
General Diversification  39%
Long-Term Outperformance  38%
Market Neutral Alpha Opportunities  23%

The majority (39% prioritize general diversification, using cryptocurrencies to spread risk across their portfolios. Another significant factor is the pursuit of long-term outperformance, with 38% seeking sustained growth from crypto investments. Additionally, 23% are drawn to market-neutral alpha opportunities, suggesting an interest in exploiting potential returns regardless of overall market trends. These motivations collectively highlight crypto-assets’ multifaceted role in enhancing hedge fund portfolio strategies. 

2.2.1. Hedge Fund Crypto Motivations by AUM

Based on their Asset Under Management (AUM), hedge funds exhibit distinct preferences for investing in crypto-assets. 

AUM Range General Diversification Market Neutral Alpha Opportunities Long-Term Outperformance
Greater than $1bn 50% 13% 38%
Less than $1bn 20% 40% 40%

Those with over $1 billion favor general diversification (50%) and long-term outperformance (38%). In contrast, funds with less than $1 billion emphasize market-neutral alpha opportunities (40%) alongside long-term outperformance (40%). 

Crypto Assets  2021 2022 2023
Other CEX-Listed Tokens  Nil Nil 9%
ICOs/SAFTs 14% 14% 9%
NFTs 19% 19% Nil
DEX Listed Tokens  24% 24% 18%
Other CEX Listed Tokens  29% 29% 55%
ETH 67% 67% 91%
BTC 67% 67% 91%

The data reveals intriguing shifts in hedge fund investments across various crypto assets from 2021 to 2023. Notably, there is a substantial uptick in the allocation towards Ethereum (ETH) and Bitcoin (BTC), escalating from 67% in 2021 to 91% in 2023. This underscores a growing preference for established cryptocurrencies, potentially driven by their market dominance and recognition as store-of-value assets.

Interestingly, the allocation to NFTs experiences a significant decline. In contrast, there is a remarkable surge in investments in other CEX-listed tokens, skyrocketing from 29% in 2022 to 55% in 2023. This shift suggests a dynamic adjustment in hedge fund strategies. 

3. Blockchain Fundraising Trend 2023: A Detailed Overview 

This detailed overview explores the Blockchain Fundraising Trend in 2023, unraveling its intricacies. 

Months  Crypto Fund Raised in USD Value Number of Fundraising Rounds
Jan, 2023 $893.57M 120
Feb, 2023 $908.37M 128
March, 2023 $1.31B 104
April, 2023 $953.05M 119
May, 2023 $655.84M 90
June, 2023 $414.61M 67
July, 2023 $723.62M 69
August, 2023 $370.33M 75
September, 2023 $562.89M 99
October, 2023 $444.66M 113
November, 2023 $1.67B 111
December, 2023 $708.31M 79

In 2023, the Blockchain Fundraising Trend has demonstrated a dynamic trajectory, showcasing fluctuations in both ‘Funds raised’ and the ‘Number of Fundraising Rounds throughout the year.

The year kicked off in January with a robust start, witnessing $893.57 million raised across 120 fundraising rounds. Subsequently, February slightly increased to $908.37 million and 128 rounds. March marked a significant surge, reaching $1.31 billion in funding across 104 rounds. However, April experienced a dip with $953.05 million and 119 rounds. May continued this trend, reflecting the $655.84 million raised in 90 rounds. June and July continued the trend with $414.61 million/67 rounds and $723.62 million/69 rounds, respectively.

August saw a severe dip with $370.33 million across 75 rounds. September recorded $562.89 million in funding through 99 rounds. October and November showcased $444.66 million/113 rounds and a substantial $1.67 billion/111 rounds, respectively. 

This month, nearly $708.31 million has been raised across 79 rounds. 

Year Total Crypto Fund Raised in USD Value Total Number of Fundraising Rounds
2023 $9.615 billion 1,174
2022 $41.86 billion 2,072

In total, 2023 has amassed $9.615 billion in crypto fundraising, involving 1,174 fundraising rounds. Comparatively, 2022 demonstrated a higher total of $41.86 billion across 2,072 rounds. While 2023 displayed a decrease in total fundraising value, the number of rounds remained relatively consistent. This suggests a shift towards a higher number of smaller-scale fundraisers than the previous year’s emphasis on fewer but larger funding events.

In 2023, the blockchain fundraising landscape has witnessed nuanced dynamics. 

Month  Category & Number of Fundraising Rounds 
Jan, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure6Blockchain Services39CeFi16Chain5Currency0DeFi22GameFi12Meme0NFT10Social10Stablecoin0
Feb, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure8Blockchain Services48CeFi14Chain4Currency0DeFi22GameFi22Meme0NFT6Social4Stablecoin0
March, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure4Blockchain Services33CeFi9Chain6Currency0DeFi21GameFi10Meme0NFT8Social9Stablecoin3
April, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure5Blockchain Services36CeFi11Chain9Currency0DeFi20GameFi15Meme0NFT8Social14Stablecoin0
May, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure3Blockchain Services28CeFi5Chain4Currency0DeFi21GameFi10Meme0NFT8Social10Stablecoin0
June, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure3Blockchain Services13CeFi7Chain2Currency0DeFi17GameFi11Meme0NFT5Social9Stablecoin0
July, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure4Blockchain Services25CeFi2Chain4Currency0DeFi10GameFi8Meme0NFT3Social11Stablecoin1
August, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure4Blockchain Services22CeFi4Chain2Currency0DeFi18GameFi5Meme0NFT5Social14Stablecoin1
September, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure11Blockchain Services36CeFi8Chain3Currency0DeFi18GameFi9Meme0NFT3Social10Stablecoin1
October, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure6Blockchain Services36CeFi6Chain5Currency0DeFi40GameFi10Meme0NFT1Social7Stablecoin2
November, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure13Blockchain Services37CeFi9Chain8Currency0DeFi17GameFi9Meme1NFT2Social14Stablecoin1
December, 2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure5Blockchain Services28CeFi6Chain13Currency0DeFi15GameFi8Meme1NFT3Social7Stablecoin0

The data reveals intriguing insights into specific categories and their underlying trend.

Blockchain Infrastructure and Services consistently attracted significant attention throughout the year. January marked a strong start with 6 and 39 fundraising rounds, respectively, and February saw a notable uptick to 8 and 48. This trend suggested a growing interest in foundational technologies and associated services, emphasizing the industry’s focus on enhancing blockchain capabilities.

Decentralized Finance (DeFi) emerged as a prominent sector, maintaining a consistent presence with 22 fundraising rounds in January and sustaining a competitive edge with 40 rounds in October. The DeFi space experienced substantial growth, reflecting the industry’s commitment to decentralized financial solutions.

GameFi, a fusion of gaming and finance, demonstrated a fluctuating pattern. While GameFi projects peaked at 22 in February, they experienced periodic fluctuations at 8 in July and 10 in October. This suggests a dynamic market response to this innovative intersection of gaming and finance.

Non-Fungible Tokens (NFTs) gained attention throughout the year, with notable peaks in January and March, recording 10 and 8 fundraising rounds, respectively. This signifies the enduring appeal and relevance of unique digital assets across diverse applications. 

The social category exhibited resilience, particularly in April, August, and November, recording 14 fundraising rounds each. This indicates sustained interest in platforms integrating blockchain with social interactions.

Surprisingly, stablecoins and traditional currencies showed no significant activity throughout the year. This could imply a focus shift away from traditional fiat-backed digital assets, possibly due to regulatory concerns or an increased appetite for more innovative crypto solutions.

The comparison between trends in 2023 and 2022 provides valuable insights into the market’s evolving landscape. 

Year Category & Number of Fundraising Rounds 
2023 CategoryNumber of Fundraising RoundsBlockchain Infrastructure72Blockchain Services381CeFi97Chain65Currency0DeFi242GameFi130Meme2NFT62Social119Stablecoin9
2022 CategoryNumber of Fundraising RoundsBlockchain Infrastructure62Blockchain Services621CeFi244Chain71Currency1DeFi326GameFi351Meme1NFT224Social148Stablecoin5

The chart reveals shifts in investor preferences and highlights emerging trends that sharpen dynamics within the crypto space.

In 2023, Blockchain infrastructure saw a notable increase, jumping from 62 to 72, signifying growing interest and investment in the foundational elements of blockchain technology. This suggests a continued focus on building a robust infrastructure to support various blockchain projects. On the other hand, Blockchain Services witnessed a decrease from 621 to 381, indicating a potential shift in emphasis from services to infrastructure development. 

Decentralized Finance (DeFi) remains a significant player, with a slight decrease from 326 to 242, suggesting a consolidation or maturation within the DeFi sector. However, GameFi experienced a drop from 351 to 130, indicating a potential reevaluation of interest in gaming-related crypto projects.

Centralized Finance (CeFi) and Chain categories decreased in 2023, with CeFi falling from 244 to 97 and Chain from 71 to 65. This could imply a falling interest in centralized financial services. Notably, Meme showed no significant momentum. NFT faced a sharp fall from 224 to 62. 

The social category decreased from 148 to 119, possibly indicating a shift away from social-oriented crypto projects or a more selective investment approach in this category. The Stablecoin category saw a slight increase from 5 to 9, emphasizing the continued importance – though not impressive. 

Overall, investors appear to be diversifying their interests, emphasizing blockchain infrastructure, and adjusting their focus within specific categories like DeFi and GameFi.  

3.2. Blockchain Fundraising Rounds By Stage

In 2023, the landscape of fundraising rounds by stage reveals a dynamic capital distribution across different phases. 

Stage  Fundraising rounds in (%)
Seed 30.62%
Strategic 9.53%
Series A 6.43%
Grant 3.49%
M&A 1.94%
Pre-Series A 1.5%
Angel 1.26%
Series B 1.19%
Extended Seed 1.11%
Private Token 0.87%
Extended Series A 0.79%
Debit Financing  0.4%
Post-IPO 0.32%
Pre-Series B 0.32%
Series C 0.32%
Presale  0.24%
Extended Series C 0.16%
IPO 0.16%
Extended Pre-Seed 0.08%
Extended Series B 0.08%
Series E 0.08%

Seed funding emerges as the primary driver, capturing a substantial 30.62% share, signifying early-stage support for budding ventures. Strategic funding follows at 9.53%, indicating a focus on aligning investments with strategic business goals. Pre-Seed and Series A rounds contribute significantly at 8.68% and 6.43%, respectively, showcasing a commitment to nurturing projects in their infancy.

Grant funding, representing 3.49%, underscores the importance of non-dilutive financial support for innovative initiatives. Mergers and Acquisitions (M&A) make up 1.94%, reflecting consolidation activities in the market. The category ‘Others’ holds the highest share at 39.3%. 

The analysis depicts a funding ecosystem that values early-stage innovation, strategic partnerships, and a flexible approach to financing, with a significant portion devoted to diverse and evolving funding models. 

3.3. Top 10 Blockchain Fundraising Locations 

In 2023, the primary hubs for crypto fundraising include the United States, United Kingdom, Germany, Canada, Singapore, France, Switzerland, Italy, South Korea, Hong Kong. 

Country  Fund Raised in USD Number of Rounds
United States  $3.18B 302
United Kingdom $939.59M 60
Germany $675.20M 14
Canada  $365.18M 22
Singapore $304.79M 73
France  $175.95M 19
Switzerland $169.43M 20
Italy  $162.85M 6
South Korea  $159.50M 7
Hong Kong $155.16M 14

A comprehensive blockchain project financing data analysis can reveal intriguing geographical trends across different jurisdictions. Let’s analyze the chart. 

Country Blockchain Services GameFi Social Blockchain Infrastructure CeFi Chain NFT Stablecoin Meme DeFi
United States 849 238 255 165 153 97 118 21 3 451
Singapore 123 55 51 44 15 23 12 1 2 85
Hong Kong 71 45 27 27 22 17 23 2 1 45
United Kingdom 78 23 20 17 23 9 6 1 0 50
China 63 26 20 22 6 19 8 2 0 32
Japan 45 20 15 2 16 11 2 0 0 18
Switzerland 32 11 9 15 11 4 2 0 0 26
Canada 31 7 15 9 8 6 2 0 0 18
South Korea 23 18 9 3 4 11 4 0 0 9
Netherlands 14 11 6 9 4 4 7 5 0 14

The chart analysis underscores the global nature of blockchain innovation, with different regions showcasing unique strengths and preferences in project financing. 

The United States emerges as a robust leader in the blockchain space, with a diverse range of projects spanning Blockchain Services, GameFi, Social, Blockchain Infrastructure, CeFi, Chain, NFT, and Stablecoin. Meme and DeFi. Notably, the highest concentration of projects falls within Blockchain Services and DeFi, strongly emphasizing foundational blockchain offerings and decentralized financial solutions.

Singapore follows closely, demonstrating a balanced portfolio of projects across categories. Blockchain Services and DeFi also dominate the Singaporean landscape, echoing global trends. The data indicates a notable interest in blockchain technology for financial and decentralized applications.

Although Hong Kong follows the global trend of increasing interest in Blockchain Services and DeFi, it exhibits a significant presence in GameFi, Blockchain Infrastructure, Chain, and NFT categories. This suggests a particular interest in gaming, blockchain infrastructure, and non-fungible tokens within the region. The diversity in project focus underlines Hong Kong’s commitment to embracing varied facets of blockchain technology.

The United Kingdom showcases strength in Blockchain Services, CeFi, and DeFi, emphasizing a keen interest in traditional blockchain services and the burgeoning decentralized financial sector. 

Meanwhile, China, a key player in the global tech landscape, maintains a solid presence across multiple categories, with Blockchain Services, DeFi, GameFi, and Blockchain Infrastructure taking precedence. 

Japan exhibits a balanced approach, with Blockchain Services, GameFi, DeFi, CeFi, and Chain projects being prominent. Switzerland and Canada, known for their financially solid sectors, are concentrated in Blockchain Services, Blockchain Infrastructure, and DeFi, indicating a strategic alignment with financial innovation.     

South Korea focuses on Blockchain Services, GameFi, and Chain, showcasing a preference for projects with practical applications. 

Lastly, the Netherlands displays a balanced portfolio, with Blockchain Services, GameFi, Blockchain Infrastructure, NFT, and DeFi projects distributed evenly.  

The dominance of specific categories in each jurisdiction provides insights into the strategic priorities and interests shaping the blockchain landscape. 

Endnote 

Coinpedia’a in-depth analysis of funding in Web3, Blockchain & Crypto for 2023 reveals a complex and evolving landscape. 

The detailed examination of VC-backed Web 3 Startups showcases a market maturation trend with fluctuations in funding amounts but resilient deal flow, emphasizing a diverse and dynamic environment. The Crypto Hedge Fund Landscape analysis indicates a recalibration in the industry, with hedge funds adjusting their crypto allocations based on risk appetite and portfolio strategies.

The Blockchain Fundraising Trend Overview provides a comprehensive monthly breakdown, highlighting shifts in funding amounts and the number of funding rounds. Noteworthy is the emphasis on diverse funding models, with Seed funding dominating.

The exploration of Blockchain Fundraising Trends by category reveals nuanced dynamics, emphasizing growing interest in infrastructure and adjustments with DeFi and GameFi. Additionally, the geographical analysis underscores global innovation trends, with different regions showcasing unique strengths and preferences in project financing.  

Overall, the report offers a holistic understanding of the multifaceted nature of funding in the Web 3, Blockchain & Crypto space in 2023. 

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