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VC investments in cryptocurrencies reach $2.4 billion after long decline
Venture capital investments in cryptocurrency companies are reportedly surging after nearly two years of cooling off.
Investments in these companies have risen to $2.4 billion during the first three months of this year, Reuters reported on Monday (May 20), citing data from PitchBook.
The report frames it as a tentative sign that venture capital (VC) investors have regained interest in the cryptocurrency sector, which raised $11.1 billion from venture capital firms in the first quarter of 2022 as the market soared high.
Then came the cryptocurrency industry downturn and seven consecutive months of declining volumes. PitchBook data shows that investors poured just $1.7 billion into cryptocurrency companies in the final quarter of 2023.
“The cryptocurrency industry is still in its early stages and there is a lot of room for growth and innovation,” says PitchBook senior analyst Roberto Le he wrote in a report.
“Barring any major market downturns, we expect the volume and pace of investment to continue to increase throughout the year,” he added.
As Reuters noted, the cryptocurrency sector flourished throughout 2020 and 2021 due to low interest rates, only to be hit by a series of high profile failures in 2022 this scared investors.
But over the past year, some investors have once again become passionate about cryptocurrencies following the U.S. Securities and Exchange Commission’s (SEC) approval of bitcoin. exchange-traded funds (ETF) earlier this year. The price of bitcoin surpassed $73,000 in March, an all-time record.
This is not to say that the cryptocurrency sector is the picture of health. A Seeking Alpha report showing the cryptocurrency was also released this weekend spot trading cooled in April for the first time in seven months, a trend fueled by a decreasing likelihood of interest rate cuts and slower inflows into U.S.-listed spot bitcoin ETFs.
The report, citing information from CCDatasaid spot market volume on exchanges such as Coinbase, Binance AND Kraken fell 32.6% to $2.01 trillion in April, while monthly derivatives trading volume fell 24.1% to $4.57 trillion, the first decline in three months.
Meanwhile, cryptocurrency custodian companies Bakkt said last week that SEC approval of bitcoin ETFs will bring institutional investors to play a bigger role in the cryptocurrency trading market.
“As evidenced by our trading volumes in the first quarter, we have started to see positive signs in the market and an improvement in the overall demand environment, with increased industry activity, higher coin prices and overall higher retail trading volume high.” Andy Mainpresident and CEO of Bakkt, said during the company’s earnings call.