Crypto venture funding, which saw a record Q1 in 2022, witnessed the deal pace of Coinbase Ventures slow down in the second quarter, with the total count decreasing 34%, from 71 to 47.
According to data released by The Block, venture funding in the blockchain sector declined 22%, from $12.5 billion to $9.8 billion. Before this decrease, investment had increased for seven consecutive quarters.
A quarterly investment report released by Coinbase Ventures shows that despite the slowdown compared to the fervent pace of late 21 and Q1 22, its Q2 activity still increased 68% YoY, indicating an overall growth of its venture practice.
Volatility caused decline in funding
The decline in venture funding activity was attributed to the volatility in markets that saw many founders rethink or put their rounds on pause, particularly at the later stages.
“We’re seeing that many companies are foregoing a fundraise unless absolutely necessary, and even then, only if they feel confident that they can show the growth needed to justify a new round,” the investing arm of Coinbase said.
Web3 gaming will onboard next wave of crypto users
Coinbase Ventures, despite the gloomy macro environment, continued to invest in projects with real utility, as shown in its focus on Web3/protocol infrastructure and Platform&Developer Tool, accounting for 38% and 21% of its total investment, respectively.
"With an estimated 3.2B+ gamers in the world, we strongly believe that Web3 gaming will make onboarding the next massive wave of crypto users. Web3 gaming remained a sector of heavy investment in Q2, with The Block estimating that $2.6B+ was raised," Coinbase Ventures stated.
CeFi Vs DeFi
The report noted that while centralized lenders indulged in opaque practices, and misused investors' funds resulting in their insolvency, the entities brought down the whole crypto markets.
In contrast, blue chip DeFi lenders Aave AAVE/USD, Compound COMP/USD, and MakerDAO operated without a hitch and every loan and its terms remained transparently on-chain for all to see.
“As in previous downturns, detractors are once again confidently pronouncing crypto dead. However, from our seat in the industry, we’re invigorated by the brilliant founders we see working tirelessly to move this technology forward. As the entire financial system and world digitizes itself, we remain convinced that the opportunity within crypto and Web3 is far greater than most realize,” the report stated.
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