Galaxy Research

Despite macroeconomic headwinds, a Galaxy Research report says activity could rebound in the second quarter of 2023 following recent crypto price increases.

Venture capitalist (VC) investment into crypto firms continued to fall in the first quarter of 2023, yet despite the current regulatory turbulence for crypto in the United States, it is still first for the number of firms raising capital according to a new report.

An April 11 report from Galaxy Research, the research arm of crypto investment firm Galaxy Digital, said the $2.4 billion invested by VCs throughout Q1 2023 was the lowest sum invested since the last quarter of 2020.

CRYPTO VC IN STARES INTO THE ABYSS

Q1 saw the lowest crypto VC activity in 2 years with $2.4bn invested across 439 deals.

investment is down, valuations are down, VC fundraises are down. learn why, view all the data, and learn what the future holds pic.twitter.com/b3JKPjNfzz

— Alex Thorn (@intangiblecoins) April 11, 2023

VC investments have been falling since peaking at nearly $13 billion in Q1 2022, with the latest quarter's results representing a decline of over 80% compared to the same ti last year.

The report noted that data on venture deals is often reported at a later time, meaning the $2.4 billion figure quoted may be revised in the future.

While capital investment has fallen since Q4 2022, the report noted the number of deals made had actually increased by nearly 20% and theorized an apparent correlation between crypto prices and capital invested could see VC activity rebound following strong price gains late in the first quarter.

CRYPTO VC INVESTING

despite the downward trend in capital invested, deal activity grew in Q1 2023, with 439 deals raised vs. 366 in Q4 2022. the gains were largely driven by relative gains in pre-seed deal activity (89) after a dismal Q4 2022 that saw only 42 pre-seed deals. pic.twitter.com/RECGCwhaKG

— Alex Thorn (@intangiblecoins) April 11, 2023

Related: Metalpha raising $100M to offer Grayscale Bitcoin products in Hong Kong

While various statistics and anecdotal evidence suggest crypto firms are leaving the U.S. to find greener pastures — citing factors such as regulatory clarity and friendlier tax policies — Galaxy found that U.S.-based companies raised 42.8% of the VC money flowing into crypto in Q1 2023 with the next closest being France at 19.4%.

While Galaxy’s report has included the jurisdictions of investments since the third quarter of 2022, the U.S. share of crypto VC investment has fallen by only 2.8 percentage points since then.

France appears to be the biggest winner, with capital investments for France-based crypto firms jumping to 19.4% in the latest quarter from less than 5% in the third quarter of 2022.

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