PitchBook recently released its Q1 2023 Crypto Report, dedicated to crypto investments, which shows that the most active companies in terms of investments are Binance and Coinbase.
The Crypto Investment Report: Binance and Coinbase stand out
The PitchBook report shows that cryptocurrency companies raised $2.6 billion in venture capital globally in the first quarter of 2023, with 353 funding rounds.
While these are still big numbers, they represent an 11% decrease in total deal value and a 12.2% decrease in the number of deals compared to the previous quarter.
In fact, from this perspective, the first quarter of 2023 was the worst since late 2020, i.e. before the start of the last big bull run. It also marks the fourth consecutive quarter of declining investment activity in the crypto sector.
However, while it was a down quarter overall, there were some upside parameters in the detail.
For example, seed rounds were up 33.3%, while late-stage rounds grew by as much as 209.2%. The biggest problem was the 16.7% drop in early-stage rounds.
Furthermore, the most notable acquisition, according to the report, was that of streaming platform Streami by Binance, through the acquisition of a majority stake in Streami’s GOPAX exchange.
The market decline continues
In fact, the real decline began in the second quarter of 2022, the quarter in which the Earth/Moon ecosystem imploded.
In fact, the all-time high was reached in the first quarter of that year, the quarter that followed the crypto market’s all-time highs.
Since then, the decline has been continuous, although much less pronounced in the last quarter than in the previous three.
It should be noted that the current level of investment in the crypto sector is lower than in the first quarter of 2021, when the last major bull run was just beginning, but still significantly higher than in the last quarter of 2020.
Thus, for the time being, the current level remains higher than the pre-bull run level.
The crypto market
The report notes that the crypto market has grown rapidly over the past decade, attracting a large number of users, including institutional investors who have poured billions of dollars into it.
Blockchain technology itself has also evolved, moving far beyond the simple recording and transfer of value to being used for secured lending, automated market making and the tokenization of off-chain assets.
According to PitchBook analysts, future cryptocurrency innovation could even threaten established players such as Visa, Mastercard and American Express, which have enjoyed decades of total dominance due to their ability to charge fees of up to 3%.
However, the collapse of several crypto companies in 2022 highlights that there are still significant challenges in the industry, so much so that mainstream adoption is unlikely to happen before better regulations and guidelines are released, according to the report.
The lack of clear regulation would be a major concern for the crypto industry, so much so that it is seen as a limiting factor.
The report cites the EU’s MiCA as one of the most comprehensive regulatory frameworks already in place.
PitchBook analysts believe that 2023 could be a turning point for the industry, as they expect financial regulators and central banks around the world to increase their focus on cryptocurrencies starting this year.
They also state that cryptocurrencies and web3 will continue to grow and evolve in the future, despite the recent challenges that have emerged over the past year.
They highlight how the crypto ecosystem has made significant progress in recent years, including decentralised finance (DeFi).
In this regard, they note that the crypto industry is still in its early stages, so there is still plenty of room for growth and innovation.
Binance, Coinbase and crypto investments
Speaking of the future, they expect established exchanges such as Binance and Coinbase to become active acquirers in 2023, particularly by targeting smaller competitors such as cryptocurrency exchanges, custodian services or peripheral activities such as financial technology (fintech) securities brokerage.
In other words, if so far many of the key players in new investment in the crypto sector have been funds or firms from the traditional investment world, it is possible that in 2023 it will be the larger crypto companies themselves that become the real protagonists in this regard.
Binance is the largest exchange in the world and Coinbase is the largest US exchange. Moreover, the demise of FTX has only strengthened these two giants, the latter of which is already listed on the Nasdaq.
Emerging opportunities in the crypto sector that investors could focus on include zero-knowledge proofing and Web3 identity.
Companies to watch include Intmax and Obol.