Digital Assets: Hope Floats Amidst Turbulent Times
By Manoj Dharra
The year 2022 ended up being a turbulent year for digital assets, with valuations falling even more. Following FTXs’ collapse in November, investors rushed to deplete their virtual wallets. Investor apprehensions over digital assets were represented by the process, which started with Terra’s collapse and ended with FTX’s debacle.
When institutional investors’ interests in digital assets are taken into account, the situation seems to change. Let’s look at the results of the investor outlook survey and the data on venture investment, mergers & acquisitions, public market activity and investor outlook.
Digital asset sector witnessed an allocation of $30.95 billion across 2201 funding deals in 2022. That’s a lot of money to have flown into a market that had trouble attracting the support of individual investors.
In terms of geographic leadership, the United States led all other countries with $38.6 billion from 2562 deals during the past six years. It’s interesting to note that there is disagreement in the nation on whether to accord legality status to fledgling industry.
The NFTs/Gaming category raised the most money in a year, $8.32 billion, out of any other category. The Football World Cup, the most watched sporting event worldwide, can be held responsible for a large portion of this.
Less merger and acquisition activity was observed throughout the entire industrial spectrum. The number of merger and acquisition transactions decreased from 233 to 186 year over year, with trading service providers being the most active.
Q1 2022 witnessed 120 maturation phase deals, whereas Q4 witnessed only 30 as of the end of November. Market Participants believe that the fall of FTX and other lenders in November 2022 will cause a further downturn in the investment sector.
Going forward, in 2023 analysts expect a noticeable pullback on venture funding in the digital asset space.
DeFi narrative picked up in 2020 and NFTs stored in 2021. The number of infancy stage deals in DeFi increased 11-fold from 2020 to 2022 as the introduction of liquidity mining by Synthetix, the rise of Uniswap, the staggering growth of Yearn, etc helped build the Defi composability narrative.
NFTs and gaming projects had a boom in 2021–2022, thanks to the advent of Axie Infinity, Facebook joining the metaverse bandwagon, and the more affordable layer 1 alternatives for high-volume in-game transactions. Yearly NFTs/gaming deals increased from 45 to 612 in the period from 2020 to 2022.
NFT/Gaming has replaced DeFi’s exponential deal count rise over the past six quarters.
$8.2 billion was raised by infrastructure development businesses or developer tooling. One billion dollars ($1 billion) of the $1.3 billion earned through token sales in the infrastructure category came from the Luna Foundation Guard and was funded by Jump crypto and 3AC.
Over 258 transactions, Crypto Financial Projects raised $ 4.4 billion. In a series E financing, digital asset custodian Fireblocks raised $ 550 million. However, Circle, a provider of payment services and the creator of USDC, raised $400 million in a growth equity round at a $9 billion value.
Investors hope to see change in fortune during 2023. The plunging prices and trading volumes in 2022 may prove an early indication of a wash-out bottom. We will have to wait to witness the revival in investment activity.
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