VCs pour $14.2B into crypto in H1 2022, but investments now slowing

KPMG noted that despite the expected downfall, investment figures remained well-positioned in comparison to pre-2021 figures, which highlights the growing maturity of the market.

Venture capital firms poured $14.2 billion into crypto across 725 deals in the first half of 2022, but big four accounting firm KPMG predicts investments will likely slow for the remainder of the year. 

According to a newly released KPMG report on Sept. 6, the largest investments in H1 2022 came from German-based crypto trading platform Trade Republic ($1.1 billion), digital asset custody platform Fireblocks ($550 million), crypto exchange FTX ($500 million), and Ethereum software company ConsenSys ($450 million).

Authors of the report, including KPMG's Global Leader of Fintech, Anton Ruddenklau, noted the investment figures for the first half of 2022 alone were already more than double all years prior to 2021, which “highlights the growing maturity of the space and the breadth of technologies and solutions attracting investment.”

However, Ruddenklau said that over-investment during the record-breaking 2021 and first half of 2022, along with a looming potential recession, rising inflation, interest rates, and the Russia-Ukraine conflict would bring about a drop off in investment this year.

Total global investment activity (VC, PE and M&A) in blockchain & cryptocurrency. Source: KPMG.

KPMG’s prediction for a crypto investment downturn appears to already be borne out in data from July, with monthly inflows into the blockchain venture capital market declining 43% in the month, according to Cointelegraph Research.

Ruddenklau expects the slowdown of crypto interest and investment to be particularly felt in retail firms offering coins, tokens, and NFTs.

Alexandre Stachtchenko the KPMG France Director of Blockchain & Crypto Assets, stated in the report that “well-managed crypto companies with healthy risk management policies, long-term vision, and strong cost and risk management approach” will best position themselves to survive the current bear market.

Of course, some cryptos will die out — particularly those that don’t have clear and strong value propositions. That could actually be quite healthy from an ecosystem point of view because it’ll clear away some of the mess that was created in the euphoria of a bull market. The best companies will be the ones that survive.

Stachtchenko added that financial institutions have become increasingly interested in blockchain infrastructure solutions and stablecoins to capitalize on the operational advantages of distributed ledger technology.

KPMG also expects further investment efforts in underdeveloped fintech markets, particularly in Africa.

Efforts on this front have been made by crypto exchange Binance, which recently entered into early-stage talks with the Nigerian government to build a crypto-friendly economic zone with the aim to generate long-term economic growth through digital innovation.