In the third quarter of 2023, the crypto and blockchain realms experienced a sharp downturn, recording a mere $1.975 billion in investments. This figure not only marked the lowest since the last quarter of 2020 but also set a new nadir for the industry. This descent began following a pinnacle of $12 billion in the first quarter of 2022.
With these shifts in funding, there’s an urgent call for a thorough examination of the present funding state within the domains of Web 3, blockchain, and crypto. This analysis aims to shed light on the complex nuances of Web 3’s funding scene, offering clarity on the current financial landscape.
1. Web3 Startups and VC Funding: A Comprehensive Review
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 began 2021 on a robust note, but by the latter half of 2022 and the beginning of 2023, it showed signs of stabilization and potential consolidation. Interestingly, while funding amounts fluctuated, the deal counts remained steady, hinting at a resilient and varied market landscape.
1.1. Quarterly Insights into Web 3 Funding Dynamics
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.
Yet, 2022 began with a slight funding dip in Q1 to $8.3B, but this was accompanied by an uptick in deals, suggesting market expansion. Q2 2022 saw another funding reduction to $7.5B but maintained a consistent deal count, indicating market consolidation.
However, the latter half of 2022 marked a concerning downturn with Q3 and Q4 investments plummeting to $3.4B and $2.5B, respectively. This downward trajectory persisted into 2023, emphasizing a challenging phase for the industry.
Also Read: Crypto Market Prediction 2024: Which Sector Will Fuel the 2024 Bull Run?
1.2. Half-Year Analysis: Comparing Web 3’s Financial Landscapes
The latter half of 2021 showcased an impressive growth rate, culminating in $16.7B investments across 1,241 deals. This bullish sentiment continued into the first half of 2022, which witnessed $15.8B in investments. However, the latter half of 2022 saw a stark drop to $5.9B, indicating a potential market correction. This trend intensified in the first half of 2023, further signaling a pronounced market contraction.
2. Crypto Hedge Fund Dynamics in 2023: A Comprehensive Review
According to the 5th Annual Global Crypto Hedge Fund report, there’s been a decline in hedge funds investing in crypto assets, dropping from 37% in 2022 to 29% in 2023. This shift suggests a reevaluation of the risk and potential of crypto-assets in portfolios.
2.1. Diving Deeper: Hedge Fund Crypto Investments
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
Also Read: Decentralized Exchange (DEX) Market Report 2023 : Analysing Market Shifts & Future Potentials
2.2. Why Hedge Funds Invest in Crypto: Top Reasons
Top Reasons for Hedge Funds’ Crypto Investments:
| 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.
Also Read: Blockchain Industry Report 2023 : Growth, Trends, and Projections
2.2.1. AUM-Based Motivational Insights
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%).
2.3. Understanding Hedge Fund Preferences in Crypto Assets
| 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.
Conversely, NFT allocations witnessed a dramatic drop, while there was a noticeable spike in investments in other CEX-listed tokens, jumping from 29% in 2022 to a significant 55% in 2023. This hints at a rapid recalibration of hedge fund strategies.
3. Blockchain Fundraising Trends for 2023: An In-depth Analysis
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.
Key Insights:
- January to March: The year commenced on a high note, peaking in March with $1.31 billion raised across 104 rounds.
- Mid-Year Dip: June witnessed the lowest fundraising amount at $414.61 million, indicating a mid-year lull.
- Year-end Surge: November was the highlight with a whopping $1.67 billion raised across 111 rounds.
Despite the total fundraising value dropping compared to 2022, the consistent number of rounds suggests that the market is diversifying, with a move towards more frequent, albeit smaller, fundraising events.
| 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.
3.1. 2023 Blockchain Fundraising Insights by Category
The breakdown by category sheds light on the specific sectors driving blockchain fundraising in 2023.
| 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.
Comparative Analysis: 2023 vs. 2022
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.
Also Read: Crypto Market Yearly Report 2023: An In-Depth Analysis and Insights
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 |
3.4. Geographical Trends in Blockchain Project Financing
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.
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In Summary
The year 2023 has been a rollercoaster ride for the Web3 and crypto spaces. Despite a sharp downturn in funding throughout the year, the data reveals underlying resilience and an evolving landscape. Blockchain infrastructure and services remain top priorities, while DeFi and GameFi continue to attract significant attention. The rise of early-stage funding and strategic partnerships highlights a focus on nurturing innovation and securing long-term success.
As we look ahead, it will be fascinating to see how these trends shape the future of Web3 and crypto, and whether established players can regain their dominance or if new pioneers will emerge to redefine the landscape.
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