What’s the present state of venture capital (VC) funding in the crypto industry, and when can we anticipate the end of the bear market?
Bitcoin BTC $30,193 registered its initial monthly decline since December 2022 in May, showing a drop of 6.98%. Interestingly, this consolidation doesn’t seem to be motivated by fundamental changes or broader macroeconomic shifts. In this phase, the crypto market sought guidance and liquidity prior to the U.S. Federal Reserve’s announcement to suspend the rate hiking cycle in June.
Various factors, like futures markets and VC funding, hint at a generally positive undertone. Yet, while traditional markets and tech equities continued their upswing in May, the actual crypto market price movement remained subdued, taking time to reveal its strength.
For those intrigued by the intricate workings and fundamental trends of the crypto industry’s diverse segments, Cointelegraph Research issues a monthly Investors Insights Report. This comprehensive study delves into areas such as venture capital, derivatives, decentralized finance (DeFi), regulation, and beyond.
Crypto Stocks and VC Activity Flourish
Blue-chip crypto stocks experienced a robust month, reporting a month-over-month return of 7%. Mining ventures and other established projects kept reaping the benefits of the market’s recovery stage back in March. Mining stocks, once again, made remarkable gains. Following TeraWulf’s impressive valuation surge, Bit Digital followed closely, seeing its stock climb by a remarkable 77% after announcing mining operations in Iceland.
Several overleveraged mining firms had been hard hit throughout the bear market due to tightening credit situations and falling BTC prices. This scenario now opens up opportunities for competitors to quickly boost valuations. As many now expect Bitcoin to have bottomed out for the present cycle, new mining facilities boasting low electricity costs and cutting-edge hardware seem less of a gamble to investors than other crypto market segments.
Simultaneously, as per Cointelegraph Research’s Venture Capital Database, VC funding exceeded $1 billion for the first time since September 2022 last month, marking a 34% rise from April with 81 deals noted. This is the third straight monthly increase in VC funding, but it’s uncertain if this uptick indicates a sustainable rise from bear market levels. In a broader perspective, inflows still stand below a quarter of bull market levels.
Bitcoin Records Highest Network Activity Amid Bear Market
Historically, various methods have been used to record data on the Bitcoin blockchain. OP_Return scripts were once popular, underpinning Omni and Counterparty nonfungible tokens (NFTs). But thanks to a loophole introduced through the Taproot scripting language, the recently popularized Ordinals protocol allows much larger inscriptions — theoretically, up to 4MB.
Following the inclusion of fungible BRC-20 tokens into the Ordinals protocol, the Bitcoin network saw its first significant fee surge since 2021. This was a boon for miners who enjoyed revenue spikes. The proportion of fee revenues to total mining revenues briefly hit its second-highest historical level at 43% on May 8. In the subsequent weeks, it fell to around 5%, still markedly higher than levels at the year’s beginning.
It’s still uncertain whether the newly added feature to transfer ERC-721 tokens from Ethereum to the Bitcoin blockchain can rekindle the excitement or if fee revenues will return to their previous insignificant role within the broader context of mining economics. The mining section of the Cointelegraph Research Monthly Trends report offers a regular summary of quantitative mining metrics and will be tracking this evolution closely.
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