A recent Crunchbase article reports a staggering decline in funding for Web3. Several high-profile bankruptcies in the space and a general decline in sentiment mean that venture capitalists (VCs) are beginning to slow down funding in the space.

FTX was one of the largest crypto exchanges in the world and a major investor, sponsor, and advocate of the Web3 space. Following its bankruptcy and that of other big companies like Voyager Digital and Three Arrows Capital, venture capitalists might be a little scared to invest.

The report notes that from Q4 2021 to Q4 2022, there was a 74% decline in funding for VC-backed Web3 startups. While this decline is substantial, there was still a 347% increase in VC funding in the space between 2020 and 2022. That’s an increase from $4.8 billion in funding to $21.5 billion.

To stay up to date with top startup investments, Sign up for Benzinga’s Startup Investing & Stock Crowdfunding Newsletter

Overall, Web3 funding decreased 26% between 2021 and 2022. While the decline is likely to continue in the near term, there are still some redemptive indicators. The drop in funding for Web3 companies is in line with the broader decline in VC funding and the broader stock market.

Gameflip, a blockchain startup raising funds on StartEngine, recently closed out a record year for its gaming assets and non-fungible token (NFT) market. In December, it had volume that exceeded $2.38 million. For reference, Gamestop’s NFT market volume is closer to $150,000 over the last 30 days, a respectable feat in a tumultuous market.

The year still saw massive funding rounds, even after FTX collapsed. Matter Labs, for example, raised $200 million about a week after the FTX implosion.

Like many investment sectors, this could simply be a continued decline in a poor market rather than the end of Web3.

See more about Benzinga’s startup investment.

Don’t miss out on real-time alerts on your actions – join Benzinga Pro for free! Try the tool that will help you invest smarter, faster and better.

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.