Now comfortably into Q4 2022, TechCrunch is busy looking at a mountain of data from the third quarter, hoping to solidify our understanding of where the market for startup deal-making was, is right now and where it’s heading next.
So far, we’ve seen stronger than anticipated American venture capital results, a somewhat troubling international picture, and we’re keeping tabs on unicorns as well on software companies. But what about the crypto world? There’s precious little good news, it turns out.
This morning, after coming across this particularly interesting datapoint about trading volumes in September from The Block, we went hunting for other bits of good news. Nearly everything that we found pointed in the other direction, however.
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Perhaps it’s too early in the present crypto winter to go hunting for green shoots. All the same, this morning, we’re going to look at the less encouraging data and close with what we can say about September. News that, while not encouraging for your supercar lease payments, may shine some hope that the decentralized economy is showing enough signs of life that a recovery could be on the horizon.
Sound good? Let’s talk crypto venture capital activity, NFT activity, price changes, DeFi, and, finally, September trading data. (We’re chatting about crypto at Disrupt next week, and we’re also hosting a pretty damn impressive web3 event later this year — see you there!)
The bad news
Having covered what was once just called “bitcoin” before “cryptocurrency” took off and later “web3” came around, I have seen a few booms and busts. It’s never fun to cover times when a particular segment of the economy is in the dumps. But I’ve seen some of the most ebullient crypto periods in history, so I don’t mind also covering some of the bad news. Just don’t take the following as me gloating.
Throat-clearing aside, the bad news:
- Venture capital totals: According to CryptoRank.io, venture capital activity in the crypto market nosedived in Q3 2022. Deals and deal value rose every quarter from at least Q1 2021 (263 deals, $4.7 billion raised) through Q2 2022 (657 deals, $15.5 billion raised) until the third quarter put a stop to that. With just 389 deals worth $5.1 billion, it was harder in Q3 to put a material crypto round together than it has been since the first quarter of 2021. Sure, with so much money raised over the last year or two, many web3 startups are likely flush with cash. But for startups in the space that missed the feast, pickings appear far slimmer in the back half of 2022.
- NFT activity: Parsing a few Dune dashboards this morning, good news is scarce in the NFT domain. Sure, the number of NFTs sold continues to be modestly robust, but there appears to be no recovery in the value of those sales. From multibillion dollar sale weeks early in 2022, the value of NFT trading has fallen to just above the $100 million mark. OpenSea continues to lead, but past that, it appears that NFTs are largely stuck in neutral today.
- Price changes: One Bitcoin is worth less than $20,000 and Ethereum has given up much of its recent gains. Now worth around $1,300, ETH has failed to live up to pre-Merge hope that its new setup would make it more valuable. That means assets priced in ETH have lost value compared to other items that are valued in, say, dollars.
- DeFi: For fans of decentralized finance, the good news is that there is still north of $50 billion locked up by crypto investors. The bad news is that that figure has declined from more than $160 billion earlier this year and is showing no real signs of recovery.
Investment in crypto companies is declining, NFT activity is shockingly low compared to earlier in the year, chain tokens have gone slack in terms of value appreciation, and the more exotic reaches of the decentralized economy have slowed.
That’s it for the bad news.
The good news
Per The Block, the following datapoint is today’s ray of sunshine:
September’s trading volumes saw the first notable increase since May of this year, The Block’s Data Dashboard shows. September’s exchange trading volume jumped to $733 billion, or a 16% month-over-month increase.
Volumes increased in September following three months when the real (“Legitimate” in The Block’s parlance) crypto trading market’s value stagnated at around $630 billion. A 16% jump is good and likely welcome, even if the monthly figures were once in the trillions when times were good instead of mere hundreds of billions.
Still, trading incomes matter for more than just the large platforms that facilitate the activity. When Coinbase is rich, to pick an example, it reinvests its revenues into the crypto economy via venture capital. But when trading platforms are making less money, that’s harder to pull off. A jump in trading activity may indicate a green shoot at the end of Q3 2022 for Bitcoin and friends.
Of course, one datapoint is hardly a trend. But when most other indicators are pointing downward, you pay more attention to those heading in the opposite direction.
And yet…
FTX venture investor Amy Wu had an interesting point to make this morning:
Creators should be able to make a living from their art, and people will buy it if they like it/want to speculate. What feels inevitable is fee compression at the platform level.
— Amy Wu (@amytongwu) October 10, 2022
This is a reframing of sorts — away from speculation as the substance of crypto art — and refocuses the question of health away from marketplaces (where fee-based income minted unicorns) and toward individuals. I like this way of thinking. Perhaps we spend too much time covering the crypto market from a macro perspective and could spend more time talking to creators.
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