The crypto community has recently been enjoying a welcome reprieve from the dismal climate of the past year, thanks to the modest uptick of asset values and the increase in overall activity. Still, it’s far from clear if these recent gains will translate into more lasting interest in the decentralized economy.
To recap: Major crypto tokens have enjoyed higher prices recently, which has helped web3 trading volumes recover to levels that we haven’t seen since early this year. This uptick even cropped up in the NFT market, where trading rose in recent weeks.
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While trading activity has since moderated from the tiny boom we had in October, the value of crypto-based assets have broadly retained their gains. The total value of all crypto tokens rose from just over $1 trillion in September to more than $1.40 trillion in October, and today rests at $1.38 trillion, according to CoinMarketCap data.
That’s a lot of wealth being created in a short span of time.
TechCrunch+ keeps close tabs on Crunchbase’s web3 funding tracker, according to which investment in web3 startups is on track to post yet another quarter of declines. For reference, web3 companies raised $10.6 billion in Q4 2021, but only managed to gather $2.9 billion in Q4 2022, per Crunchbase. This year through November 21, that metric is at $691.7 million. That final figure puts web3 startup fundraising on pace to land below the $1.3 billion web3 startups raised in Q3 2023, the lowest quarterly result since 2020.
Of course, there is a lag between what’s happening in the market and the data. Even if every web3 investor saw crypto asset prices and activity picking up in October and decided to get busy with their checkbooks, we’re not likely to know about those rounds for a while.
The question before us is one of reactivity. Over the next month or two, we should be able to see more clearly if the good days of October managed to bolster investor confidence in the sector. If not, we can infer that web3 startups will require a larger bump to activity and value if they want to regain investors’ favor.
Investors, as TechCrunch+ has reported, are willing to admit that price gains are a positive sign, but few seem to expect massive changes.
A difficult period
Crypto has been in the news lately, but not for wholesome reasons. The trial of former FTX CEO Sam Bankman-Fried returned crypto assets and exchanges to regular conversation, but the topic was hardly a good look for the sector. A suit filed yesterday by the SEC against another exchange only adds to the bad news run, as do investigations of this sort.
I’ve wondered all year what it could take to reignite the crypto market. I’ve been following this space since about 2013, and every time I’ve seen web3 stumble and fall into a lengthy period of hibernation, it has come roaring back. But the current downturn is persistent in a manner that must be strenuous for startups. Perhaps some of the weight will be lifted by crypto prices climbing up, but spot trading volumes have already peaked and are on the way back down.
But some improvement is better than none: November is already Coinbase’s fourth-best month of the year by trading volume. That has to count for something, right?