PitchBook: venture capital investment in crypto startups declined 37% YoY in Q3 2022 to $4.44B, the industry's lowest level in more than a year
Hannah Miller / Bloomberg :
Context & Ripple Effects
This is the second consecutive quarterly drop in what became a prolonged crypto funding winter: after Q2 2022's $6.76B, itself down 31% from the record $9.85B quarter, Q3 2022 lands at $4.44B — the lowest in more than a year and less than half the Q1 peak.
The trajectory matters because it did not stop here: PitchBook's later counts show the slide continuing through Q1 2023's $2.4B trough before any recovery, making this quarter the moment the drawdown shifted from correction to sustained retreat.
First-order effects
- Crypto startups raising in late 2022 face a market where quarterly dollars have halved from the Q1 2022 record within six months, forcing longer runways or smaller rounds at reset terms.
- Generalist VCs that allocated into crypto during the 2021-22 peak now hold positions marked against falling comparable valuations, tightening their appetite for new crypto checks.
Second-order effects
- With broad-sector funding scarce, investor attention narrows to categories with clearer utility — a pattern PitchBook later confirmed when infrastructure startups kept drawing capital even as total crypto funding fell further.
- Portfolio companies dependent on follow-on crypto rounds compete for a shrinking pool, pushing weaker startups toward consolidation or shutdown rather than down rounds.
Third-order effects
- If the pattern holds, crypto funding becomes cyclical and selective rather than momentum-driven: the eventual recovery quarters (Q4 2023's first rise since Q1 2022, then Q1 2024's uptick) come off a base roughly a fifth of the peak, with deal flow concentrated in infrastructure.
- Sector rotation compounds the squeeze — PitchBook's later data shows venture capital concentrating heavily in AI, meaning crypto competes for the same LP and fund allocations that once flowed its way.
The trend: Crypto venture funding entered a multi-year drawdown in mid-2022 that repriced the sector from record highs toward a smaller, infrastructure-focused capital base.