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Crypto Funding and Deals Hit Three-Year Low

Last year’s “crypto winter” apparently extended into the summer of 2023.

That’s according to a recent report by blockchain intelligence firm Messari on the state of fundraising in the cryptocurrency industry.

“Crypto’s ongoing bear market is possibly best exemplified by the industry’s fundraising data,” the report said. “Q3 2023 was no exception to the multi-quarter downtrend we’ve witnessed since the beginning of 2022 — Q3 marked new lows in both overall funding amounts and deal counts that have not been seen since Q4 2020.”

The report found the industry logging a little less than $2.1 billion for just under 300 deals, a 36% drop from the previous quarter. Most of the deals were early-stage rounds, with seed funding making up $488 million of the total.

“Trends in deal counts show a significant shift away from later-stage projects and into early-stage projects over the last three years,” it said.

Later-stage deals — which Messari defines as Series B or later — have declined from an 8% deal share in the fourth quarter 2020 to a 1.4% deal share in the third quarter of 2023. 

“This is indicative of strategic bear market positioning as investors attempt to fund projects with asymmetric upside that can return greater multiples when market sentiment eventually shifts in a positive direction,” the report said.

As PYMNTS has written, the crypto industry entered 2022 riding high, and saw funding hit its peak during the first three months of that year. Then came a sectorwide downturn with the collapse of Terra, followed by the failure of FTX.

The downturn in funding isn’t confined solely to the crypto sector. As noted here recently, access to business financing remains a huge challenge for small- to medium-sized businesses (SMBs).

Research by PYMNTS Intelligence and Cross River found that the share of SMBs that reported having access to business financing sources fell from 42% to 39% between April and July. Even bigger, more financially stable firms had trouble accessing financing, with only 46% reporting access to business financing in July, compared to 59% in April.

“Overall, as traditional banks become less accessible for many industries, there is an opportunity for FinTechs to step up and fill the gap by providing alternative business credit sources that can improve SMBs’ access to financing solutions while managing risk,” PYMNTS wrote last week.