Key Takeaways:
- Crypto funding plummeted to a three-year low in June 2023.
- Declining VC interest could hinder the altcoin recovery.
- An expert suggests a bullish breakout toward “well over $4 trillion” for the altcoins excluding ETH.
YEREVAN (CoinChapter.com) — The crypto industry’s funding has plummeted nearly 90% in June compared to a year ago, according to digital asset data provider CryptoRank.
Crypto funding plunges – what are the implications?
VC contributions went from $3.8 billion with 209 funding rounds in June 2022 to merely $417 million in June 2023, with 66 funding rounds; – a three-year low for the sector. The month-over-month change stood at 36%, following a drop from $650 million.
Blockchain services and DeFi led the category breakdown, with 15 and 18 rounds, respectively. Meanwhile, GameFi and NFT categories tanked under ten rounds each in June.
Another data provider RootData shows a slightly different landscape, albeit with a clear downtrend in VC interest toward the digital asset space and an apparent 70% drop in funding YoY.
Why is VC interest fading?
The crypto sector has seen a turbulent year, and several big incidents could have put a large CAUTION sign on crypto investments.
For those out of the loop, the US Securities and Exchange Commission carried out a major regulatory crackdown on the altcoin sector in early June. The agency sued the two largest crypto exchanges, Coinbase and Binance, deeming many altcoins “unregistered securities.”
However, the cascade of troubles began in 2022, with the infamous Terra ecosystem implosion in May and the FTX exchange fiasco in November. The collective crypto market cap shrunk 75% from its $3 trillion peak and bottomed out at $770 billion in June 2022.
Moreover, In 2022, a report by PricewaterhouseCoopers revealed that more than a third of traditional hedge funds were investing in cryptocurrencies.
Those funds, tracked by index provider BarclayHedge (an index of 47 hedge funds, the names of which BarclayHedge keeps anonymous), ended 2022 down almost 50%, as per Reuters.
Meanwhile, the fading interest from investors could have bearish implications for the altcoin market in Q3 and pare the market share gains in the previous two weeks.
Altcoin 15% rally at risk
The SEC lawsuits shaved 15% off the collective altcoin market cap, but the latter pared its losses after bottoming out on June 16. As a result, the altcoin market cap (including Ether) reached over $570 billion on July 3.
Given the plummet in June crypto funding, the recent recovery could be in danger in Q3. The United States is the largest funding market for crypto; a prolonged SEC crackdown could further hinder DeFi development and, by extension, altcoin prices.
Raoul Pal suggests an altcoin market break “well over $4 trillion”
However, Raoul Pal, a former Goldman Sachs executive and market expert, believes the “measured target” for the altcoin market, excluding Ether, is $4 trillion. “It is one of the most bullish and perfect charts I’ve ever seen,” added Pal, citing a weekly chart with a bullish ‘falling wedge’ formation.
Also read: CME Group ready to launch Ether (ETH) / Bitcoin (BTC) Ratio Futures Next Month.
Meanwhile, including Ether in the picture could give a better view of the altcoin market direction.
Ethereum still leads the DeFi market, locking nearly $27 billion in funds and hosting 836 protocols. Furthermore, given the blockchain’s regulatory clearance, its market share could grow in the coming quarter, underscoring the importance of keeping track of its funding.
