The web3 winter isn’t going to thaw anytime soon

There’s something phoenix-like about the crypto world. No matter how high the highs, or how low the ensuing lows, blockchain enthusiasts, founders and investors remain confident that their favored sector will rise again. You have to give it to them: It always has bounded back.

We saw this happen in the wake of the initial coin offering (ICO) boom, for example, when NFTs and DeFi took off, helping propel the web3 startup and token world to new heights.

Today, we’re checking on the vital signs of web3 as the sector struggles up the crater left by major tokens, blockchains and startup projects falling back to Earth after 2021. If there’s another rollercoaster ride coming in crypto land, we want to be ready for it.


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Sadly, there isn’t going to be a resurgence anytime soon. From an initial read of data from the past month, we can infer that the current crypto winter is far from thawing — it could even be getting colder. Let’s dig in.

Boom to bust?

Data from Crunchbase paints a jarring picture of investment in web3, crypto and blockchain startups.

Companies in the sector collectively attracted $1.2 billion in VC funding in April and May of this year, according to the firm’s web3 tracker. There’s still one month left in this quarter, but it’s pointless to expect any miracles: At the current rate, Q2’s tally would reach $1.8 billion, less than the $2 billion raised by web3 startups in Q1 2023.

That $2 billion wasn’t anything to write home about either. Though Q1 2023 was slightly better for web3 companies than 2020’s quarterly numbers, it was about five times less than Q1 2022 ($10.8 billion).

For an even more painful comparison, the $4.5 billion crypto fund that a16z debuted in 2022 is worth more or less how much we can expect the entire sector to raise this year if things continue like this.

While we are sort of used to pyramid-shaped VC investment graphs by now, the web3 sector is one of the sharpest examples of this boom-to-bust cycle — or, if you’re more optimistic, of a temporary post-hype winter.

The pace of unicorn creation is one of the most revealing data points when it comes to investor interest in a sector. This quarter so far, only one crypto unicorn was born, per the same Crunchbase dataset. That is far lower than the 11 unicorns we had in the muted first quarter and seems to indicate that venture interest is continuing to slip.

The line points downward

Some of these declines are easy enough to justify: Many investors who were not fully focused on crypto got into the sector when it was hot and have since pulled back. Similar to how Tiger Global was, for a brief period, ubiquitous in the late-stage startup scene only to later back out as if pulled by its tail, many private-market investors have stopped doing web3 deals. (Fortune’s recent rundown of the economic realities faced by venture capitalists in the crypto space is recommended reading.)

That is just one part of a whole, however. Another fact is that interest and enthusiasm for crypto tokens and assets remains tepid.

Here are a few data points to back our hypothesis. First, we have data from crypto-focused media outlet and research shop, The Block, indicating that crypto trading volume in May fell to its lowest monthly level since late 2020.

The following chart is useful context for the direction of momentum in crypto spot exchange volume:


Other sources paint a similarly bearish picture. Data collected by Dune and sorted by HilDobby indicates that despite a material uptick in total trading volume, NFT-related crypto activity is also on the decline.

There are other signals to consider. Layoffs at Binance and earnings results from Coinbase and Robinhood, while, at times, better than expected, are proof that even the big companies in this space are unable to find their footing on the back of resurgent crypto trading. Frankly, this data makes us worry that the crypto winter is settling in deeper.

What could change the narrative and put crypto back on the upswing? A new technological innovation. ICOs, despite the clear financial issues, were innovative. NFTs were a neat new tech for the blockchain as well. But as crypto-powered games stutter and regulation looms, it’s not clear what will be the next catalyst for resurrecting crypto interest and adoption.

Perhaps a crypto company that can still raise capital will build that new tool, technology or service. Until then, we think it best to keep an eye on the vitals and wait for the pulse to quicken.