The year of 2022 was marked by a number of significant failures and bankruptcies in the crypto currency industry, which profoundly affected investors' sentiment about the market. According to the most recent information, crypto startup companies were only able to get the finance that was 42.5% lower in 2022 compared to the previous year, 2021.
One of the most significant price increases in the history of crypto currencies occurred in 2021. In addition, the monetary stimulus measures implemented by the central bank contributed to a large increase in the market's overall liquidity.
2022 witnessed one of the most significant corrections in the crypto realm, which resulted in a significant loss of investor interest. Several businesses were forced to shelve their expansion plans, and a handful was forced to cease all operations.
According to a survey (1) by CoinGecko, crypto currency startups raised a total of $21.26 billion in 2018, with nearly half of that amount obtained during the first quarter of 2022 when the industry was still in better form.
Despite this, market sentiment reached an all-time low in the second part of the period, which was caused by the collapse of the Terra LUNA ecosystem. Because of this event, $40 billion worth of investors' money was wiped out from the market. The collapse of the Terra ecosystem failed large companies like Three Arrows Capital (3AC) and Celsius Network, both of which went out of business.
The amount of money raised to that point was only $3.61 billion as of the end of the third quarter of 2022. The crypto business suffered yet another significant setback when the crypto currency exchange FTX went offline in the most recent fiscal period.
Consequently, the crypto currency companies as a whole were only able to raise a little more than $3 billion. In contrast, the total amount of money raised during the crypto bull run of 2021 was greater than $37 billion.
Still 2022 Better Than Previous Years
Despite the significant decline that occurred in 2022, the year that just ended was still superior to some of the years that came before it, such as 2018, 2019, and 2020. CoinGecko explained the most likely cause of it, which was as follows:
"The relatively better funding performance in 2022 points to the cryptocurrency industry's growth over the last five years, supported by more projects securing financial backing and increasing interest from institutional investors," says the report.
"The growth of the cryptocurrency industry over the last five years has been supported by more projects securing financial backing."
Last year, prominent investors such as the venture capital powerhouse Andreessen Horowitz (a16z) raised $4.5 billion in one of the largest financings ever secured in the crypto currency industry.
A16z announced that they would invest the funds in digital assets and blockchain and cryptocurrency businesses during the bear market and disperse the capital among blockchain and crypto currency firms.
Other big investments made in the past year include Fireblock's $550 million in the financing, the $450 million funding round that Consensys completed, and the $500 million developer and startup investment fund that Immutable established.
According to David Pakman, managing partner of the crypto venture capital firm CoinFund, VC firms are interested in crypto currencies. Still, they are being more thorough by devoting more time to the process. Venture capital firms are calling for stricter regulations to protect their investors.
According to Pakman, prices in the crypto currency field are moving in the direction of being more reasonable.
In the summer of 2023, according to Robert Le, a crypto researcher at the research firm PitchBook, a pick-up in venture capital investments is anticipated. This is because crypto currency funds are now obligated to use the enormous amounts of capital they received during the bull market of 2021. He stated that the current low level would not be maintained indefinitely.