Crypto Funding Continues to Decline | Ember Nuggets #45

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Nugget #1: Crypto Funding Continues to Decline

The Block recently shared figures from August which showed funding and active deals declined for the past five consecutive months, with a little more than $1.8B allocated. Infrastructure and NFT/Gaming remain resilient, taking most of the investment dollars.

Data is in line with the current macroeconomic conditions as most investors are slowing down capital deployment and becoming defensive in a rising rate environment that seems to be headed towards a global recession. The bright side remains with NFTs & Gaming. Limit Break and Proof Collective both raised massive rounds with investors betting on both companies’ abilities to build a robust and defensible business in a sector that seems promising long-term, regardless of the current sentiment.

Nugget #2: Quick Stats on Money Laundering - Crypto vs. Cash

Crypto is often portrayed as a money laundering device that subverts financial regulations across the globe by the media and the government. Some have gone so far as to call it the vehicle that may cause the “9/11” for financial markets. Many of these claims are clickbaity and grossly overblown.

First, cash has less of a paper trail than crypto. The core technology behind crypto is the blockchain / DLT: a public ledger that promotes transparency. Furthermore, most developed countries with basic financial regulations have KYC/AML in place so off/on-ramps to crypto are easily traceable.

Now, let’s dive into some high-level data. The United Nations estimates that on average $800B - $2T is laundered globally for fiat annually. A recent Chainalysis report shows that crypto had an estimated $6.8B laundered in 2021. The fiat market is worth roughly $40T while the crypto market in 2021 peaked at ~$3T. Looking at the data, roughly 5% of fiat may get laundered annually. While in crypto, if we say even $10B was laundered and the market cap was $1.5T we would see ~0.67% of the market is used for laundering activities. The biggest point is that money laundering is not directly correlated with market growth.

Just a little tidbit to share during your next family dinner.