Venture capital investment in virtual currency companies is reportedly increasing after about two years of stagnation.
Investments in these companies rose to $2.4 billion in the first three months of this year, Reuters reported on Monday (May 20), citing data from Pitchbook.
The report characterizes this as a preliminary signal that venture capital (VC) investors have regained interest in the crypto sector, with the market surging in the first quarter of 2022. received an inflow of $11.1 billion from venture companies.
Then came a downturn in the cryptocurrency sector, with trading volumes declining for seven consecutive months. Investors poured just $1.7 billion into crypto companies in the final quarter of 2023, according to PitchBook data.
“The crypto industry is still in its infancy and there is a lot of room for growth and innovation,” Robert Lee, senior analyst at Pitchbook, said in a report.
“Barring a major market downturn, we expect the volume and pace of investment to continue to increase throughout the year,” he added.
As Reuters noted, the crypto sector blossomed in 2020 and 2021 thanks to low interest rates, but suffered a series of high-profile bankruptcies in 2022 that scared investors.
But last year, some investors became enthusiastic about the cryptocurrency again after the U.S. Securities and Exchange Commission (SEC) approved a Bitcoin exchange-traded fund (ETF) earlier this year. The price of Bitcoin hit an all-time high in March, exceeding $73,000.
That's not to say the crypto sector is a beacon of health. This weekend also saw the release of a report from Seeking Alpha, showing that crypto spot trading in April cooled for the first time in seven months, a trend that could lead to a lower chance of interest rate cuts and US-listed spot Bitcoin trading. This is being driven by a slowdown in inflows to ETFs.
The report cited information from CCData, saying spot market trading volume on exchanges such as Coinbase, Binance, and Kraken fell 32.6% in April to $2.01 trillion, and monthly derivatives trading volume fell 24.1%. It was the first decline in three years, to $4.57 trillion. A few months.
Meanwhile, crypto custody firm Bakkt said last week that the SEC's approval of Bitcoin ETFs will allow institutional investors to play a larger role in the crypto trading market.
“As evidenced by our trading volumes in the first quarter, we are starting to see some bright spots in the market, with an improving overall demand environment due to increased industry activity, rising coin prices, and overall retail trading volumes. ” said Andy Main, President and CEO. Bakkt's CEO said this at the company's financial results conference.
