Capital Report Crypto Ventures - Q3/2023
Posted by Thanh Dat - 18/10/2023
Q3 was a loss quarter in security
According to the quarterly report by CertiK, a blockchain security firm, the third quarter of 2023 has been the most financially devastating period of the year, as nearly $700 million worth of digital assets were lost due to different security incidents, surpassing first-quarter losses of $320 million and second-quarter losses of $313 million. Mixin Network represents the largest security loss case, with $200 million worth of assets drained from their mainnet.
DWF Labs Isolated by Other Market Makers (MM)
Wintermute's Chairman, Yoann Turpin, criticized a series of issues related to DWF Labs at the Token2049 event (September 13-14, 2023 in Singapore). In his speech, Turpin expressed a negative view that DWF Labs should not be considered a market maker in the way Wintermute understands it.
Cristian Gil, the founder of GSR, was frustrated, stating that DWF and GSR Wintermute should not appear on the same panel, considering it an insult to GSR and Wintermute.
Turpin also raised a more significant issue: due to DWF Labs, the community has developed a negative perception of the role of MMs in the cryptocurrency market. He argued that many MMs in this market tend to focus on price manipulation rather than providing the necessary liquidity to promote sustainable market development.
BlackRock CEO, Larry Fink, refers to Bitcoin as digital gold
Larry Fink, who once referred to Bitcoin as an "index of money laundering" in 2017, has made a 180-degree shift in his perspective to support cryptocurrency.
“I do believe the role of crypto is digitizing gold, in many ways. Instead of investing in gold as a hedge against the onerous problems of any one country. Let’s be clear - Bitcoin is an international asset.” said Fink.
BlackRock - which manages $9.5 trillion in assets - helped spur a Bitcoin run with its application in Q2/2023.
Senior executives at Binance resign
Binance has witnessed the departure of 10 senior members from various departments just in the third quarter of 2023. Although executive departures from a company are normal based on pre-set contractual obligations, the number of executives leaving Binance amid increasing regulatory troubles has become a notable point in the cryptocurrency community.
Four top executives from Binance are said to have all left on the same day following Binance's response to the U.S. Department of Justice investigation. A report by Fortune suggested that these top executives were dissatisfied with the crypto exchange's response. However, Binance's CEO, Changpeng Zhao, dismissed all such reports, labeling them as fear, uncertainty, and doubt, or FUD."
The friend.tech fever
Friend.tech is a decentralized social networking application built on Layer 2 Base and uses user data sourced from X. Generally, Friend.tech is a platform that allows users to chat with celebrities in a private group, and users are required to purchase a 'key' of that celebrity to chat with them.
Launched in August 2023 and through the end of the third quarter, the development team of the social network friend.tech has earned nearly $20 million.
3AC Founder Arrested After More Than a Year on the Run
Zhu Su was arrested at Changi Airport (Singapore) while attempting to leave on the afternoon of September 29. The head of 3AC is now facing a four-month prison sentence for not cooperating during the bankruptcy investigation in July 2022. Zhu Su and co-founder Kyle Davies had fled, leaving behind a debt of up to $3 billion.
3AC, headquartered in Singapore, once managed an asset portfolio worth about $10 billion and was one of the most influential entities in the digital currency market.
CoinDesk Lays Off 45% of Editorial Staff
Crypto media company CoinDesk has laid off 45% of its editorial staff as its parent company, Digital Currency Group, plans to bring on strategic investors.
According to a source familiar with the situation, the media company is laying off 20 people, which represents 45% of its editorial team. This represents a 16% workforce reduction for the entire company, according to another source.
Fed Analyzes Potential of Tokenization, Referring to Real-World Assets
In the analysis, the Fed outlines tokenization and believes it to be a new and rapidly developing financial innovation in the cryptocurrency asset market, as well as discusses the potential benefits and financial stability implications.
Tokens create a link between the digital asset ecosystem and the traditional financial system. At a large enough scale, tokenized assets could transmit volatility from the cryptocurrency asset market to the market for the reference assets of the cryptocurrency tokens.
INVESTMENT ACTIVITY LANDSCAPE
In the third quarter of 2023, a total of 204 successful fundraising rounds were conducted with a combined value of $1,289,280,000. The smallest fundraising round had a value of $500,000, while the largest fundraising round, valued at $100,000,000, was led by BitGo. The average value of fundraising rounds in the entire third quarter is $8,317,935, and the majority of projects have fundraising values below this average.
- Note: The total fundraising value in the third quarter does not include rounds of funding with undisclosed values, so the actual total fundraising value may be higher than the figure above.
The Seed rounds have the highest proportion among all types of fundraising rounds, accounting for 40.1%. This indicates that Seed rounds are still the most preferred rounds for investors to allocate the most funds.
The third quarter witnessed an increase in the number of fundraising rounds throughout the months, specifically in July with 63 projects, August with 65 projects, and September with 76 projects.
The total fundraising value of projects in August only reached nearly $335 million, which is the lowest level in a single month in the past 3 years.
The reason for this is that most fundraising rounds in August had significantly lower values than the average, compared to the other two months.
In this quarter, projects within the Ethereum ecosystem held the largest share, followed by BNB Chain, Polygon, Base, Solana, and others.
DeFi category had a significant share, followed by NFT, Analytic, Social Network, and the remaining categories.
Comparing with the data from the second quarter report conducted by CryptoViet Ventures, the total value raised through subsequent fundraising rounds, as well as the number of ongoing fundraising rounds, continue to show a declining trend in the third quarter:
- The fundraising scale has decreased from $1,553,490,000 to $1,289,280,000.
- The number of fundraising rounds has slightly decreased from 212 to 204.
ZkSync is a scalability solution for Ethereum, enabling payment, token swapping, and NFT transactions on Layer 2. It is a platform that leverages Zero-Knowledge (ZK) Rollup technology, with a user-centric approach from Matter Labs.
ZkSync utilizes Zero-Knowledge proofs to ensure the authenticity and security of transactions. Transactions are proven without revealing specific information about the transactions and user balances. By conducting transactions offline and aggregating the results onto the Ethereum mainnet, zkSync accelerates transaction processing compared to direct on-chain execution.
The project has raised a total of $458,000,000 in various fundraising rounds, including:
- Seed round (9/2019): $2,000,000 led by PlaceHolder.
- Series A (3/2021): $6,000,000 led by Union Square Ventures
- Series B (11/2021): $50,000,000 led by A16Z
- Funding round (1/2022): $200,000,000 led by BitDAO to support projects within the zkSync ecosystem
- Series C (11/2022): $200,000,000 led by Blockchain Capital
The reality has shown that Quarter 3 did not progress optimistically as anticipated in the Quarter 2 report, as everything continues to trend downward, from total value raised to the number of fundraising rounds. This indicates that VCs are still very cautious and prudent in their investments at this time. They have not yet seen the market's optimism, and the dullness and lack of liquidity continue to dominate the market.
Quarter 3 also clearly demonstrates the market's exodus, with a series of high-level personnel leaving Binance, and Coindesk laying off 45% of its employees for restructuring.
However, alongside the downturn, the market also exhibits a few bright spots. For example, the socialfi wave is surging strongly, the potential of real-world assets is being mentioned frequently, and the CEO of BlackRock refers to Bitcoin as digital gold. Perhaps, amid the gloom, there are still very promising opportunities.
Let's look forward to the fourth quarter of 2023 to see if the crypto market will continue its downtrend or make a rebound.