Cryptos startups hit record funding this year

Pitchbook said that total funding at cryptocurrencies startups this year is set to exceed investments in 2021, but the pace of capital deployment is slowing due to a series of blowups that have sapped private equity investment appetite.

In the first nine months of 2022, the global industry attracted $19.9bn in venture capital VC investments, 41% higher than a year ago, according to Pitchbook data. The last year, drew in a record $21.2 billion.

The amount of capital deployed has declined over the last year, with only $4.0 billion invested in the third quarter, representing a 38.3% quarter-over-quarter decline and the lowest amount since the second quarter of 2021, Pitchbook said.

The collapse of FTX last month was the most shocking of key market players this year, including Celsius and Voyager, major tokens terraUSD and Luna that have shaken investment sentiment and wiped out $1.5 trillion in the market cap.

Robert Le, an analyst at PitchBook, said that the lack of clear regulation and guidance remains one of the biggest concerns and limiting factors in the industry.

Mainstream adoption is unlikely to occur until better guardrails are in place in the form of established laws and guidelines. FTX backers, including Singapore's state investor Temasek Holdings, SoftBank Group Corp's Vision Fund and Sequoia Capital, reduced their investment to zero after filing for bankruptcy.

Adam Struck, at LA-based venture capital firm Struck Capital said that bearish sentiment will continue for the rest of the year and that the pace of investment and amount of capital will get lower and lower due to concerns over contagion risk.

In the third quarter, VCs injected $1.5 billion in the so-called Web 3 companies, a 44.5% growth, according to Pitchbook.

Web 3, a term used to describe a potential next phase of the internet, was the only segment where an increase in capital was invested in the quarter, as it is relatively insulated from the day-to- day price movements of crypto tokens, according to Pitchbook's Le.