VCs pumped $14 billion into cryptocurrencies during the first half of 2022: Report

By: Dickson Arinze

VCs pumped $14 billion into cryptocurrencies during the first half of 2022: Report

September 7, 2022 5:11 AM

KPMG observed that, despite the predicted decline, investment numbers were still in a strong position relative to those seen prior to 2021, which reflects the market's increasing maturity.

 

In the first half of 2022, VCs invested $14 billion across 725 crypto deals, but KPMG, one of the "big four" accounting firms, believes that pace will slow in the second half.

 

German crypto trading platform Trade Republic ($1.1 billion), digital asset custody platform Fireblocks ($550 million), cryptocurrency exchange FTX ($500 million), and Ethereum software firm ConsenSys ($450 million) reportedly made the largest investments in H1 2022, according to a report published by KPMG on September 6.

 

The report's authors, who include KPMG's Global Leader of Fintech Anton Ruddenklau, found that investment numbers for the first half of 2022 were already more than double all years prior to 2021, a fact that "highlights the growing maturity of the space and the breadth of technologies and solutions attracting investment."

 

Ruddenklau, however, predicted a slowdown in investment this year due to the aftermath of record-breaking spending in 2021 and the first half of 2022, as well as a possible recession, high inflation, interest rate changes, and the Russia-Ukraine war.

 

Global venture capital, private equity, and mergers and acquisitions spending on blockchain and cryptocurrencies. Source: KPMG.

 

According to Cointelegraph Research, monthly inflows into the blockchain venture capital market dropped 43% in July, proving that KPMG's forecast for a crypto investment downturn appears to already be borne out by data from that month.

 

Ruddenklau predicts that retailers who offer coins, tokens, and NFTs will feel the effects of the waning interest and investment in cryptocurrencies the most.

 

To survive the current bear market, "well-managed crypto companies with healthy risk management policies, long-term vision, and a strong cost and risk management approach," as stated by KPMG France Director of Blockchain & Crypto Assets Alexandre Stachtchenko, are in the best position.

 

"Naturally, some cryptocurrencies will fail, especially if their value propositions are unclear. This would be beneficial for the ecosystem as it would help clean up some of the chaos that was created during the bull market's heady times. Only the strongest businesses will make it through this."

 

Stachtchenko continued by saying that banks are looking into blockchain infrastructure solutions and stablecoins to take advantage of the efficiencies brought about by distributed ledger technology.

 

In addition, KPMG anticipates increased investment in emerging fintech markets, particularly in Africa.

 

Binance, a cryptocurrency exchange, is taking action in this direction by initiating talks with the government of Nigeria to establish a crypto-friendly economic zone with the goal of generating long-term economic growth through digital innovation.