EMERGING TECH RESEARCH
Crypto Report
VC trends and emerging opportunities
Q4 REPORT PREVIEW
The full report is available through
2023 the PitchBook Platform.
Contents
Vertical update 3 Institutional Research Group
Analysis
Q4 2023 timeline 5
Robert Le Senior Analyst, Emerging Technology
Crypto landscape 6
robert.le@pitchbook.com
Crypto VC ecosystem market map 7 pbinstitutionalresearch@pitchbook.com
VC activity 8 Data
Emerging opportunities 17 Matthew Nacionales Senior Data Analyst
Centralized market makers 18 Publishing
Bitcoin Layer 2 22 Report designed by Megan Woodard and Drew Sanders
Published on February 14, 2024
Select company highlights 25
Babylon 26
Rhinestone 28
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 2
Q4 2023 timeline Q4 VC deal count summary
326
total deals
November 2
Sam Bankman-Fried, former CEO of FTX, is found November 29 -2.4%
October 6 QoQ growth
guilty on all charges including convictions for Wormhole, a cross-chain bridge, raises a $225
VanEck, ProShares, and Bitwise launch the first wire fraud, securities fraud, commodities fraud million early-stage round at a $2.5 billion post-
News
-32.9%
VC deal
ETH futures ETFs. The move is the logical next conspiracy, and money laundering conspiracy. This money valuation. This is one of the few crypto
News
step after BTC futures ETFs were in the market outcome emphasizes the legal responsibilities of unicorns minted in 2023, despite the startup YoY growth
for a couple of years. The approval of ETH futures crypto entrepreneurs, the potential consequences suffering a major security breach in 2022, wherein
ETFs could be a precursor of eventual spot ETH of regulatory noncompliance, and the need for a hacker exploited a smart contract vulnerability to -48.8%
ETF approval. better VC investor oversight and governance. steal $320 million in crypto from the protocol. YTD growth
Q4 VC deal value summary
Oct 1
Nov 1
Dec 1
Dec 31
$1.9B
October 26 November 21 December 13 total deal value
JPMorgan’s JPM Coin, a digital token, is reported Binance agrees to pay nearly $3 billion, including Coinbase launches spot trading on its international
to process more than $1 billion in transactions a record $1.4 billion fine, to settle a US Commodity exchange—part of its strategic shift to expand 2.5%
News
daily.1 The tokens are used mostly for US dollar Futures Trading Commission lawsuit. This is globally. This is a significant response to the QoQ growth
News
News
transactions, which allow wholesale clients to make part of a broader $4.3 billion payment to the increasing regulatory scrutiny in the US. In our Q3
payments in dollars and euros through a private US government, involving settlements with the 2023 Crypto Report, we noted that the company -42.8%
blockchain network. This highlights the ongoing Department of Justice and the Department of the launched a derivatives exchange abroad. YoY growth
exploration of blockchain for instantaneous, lower- Treasury. The lawsuit accused Binance of offering
cost payments, although the technology has yet to
be tested at the scale of existing payment networks.
unregistered crypto derivatives in the US and
willfully evading US law.
-68.2%
YTD growth
1: “JPMorgan Says JPM Coin Now Handles $1 Billion Transactions Daily,” Bloomberg, Suvashree Ghosh, October 25, 2023.
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 5
Crypto
landscape
Blockchain networks
Infrastructure & developer tools
Access
Web3
DeFi
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 6
VC activity Crypto VC deal activity
In Q4 2023, there was a modest turnaround in crypto fundraising as startups secured $1.9 billion 3,211
2,738
across 326 deals. This represents a 2.5% increase in invested capital but a 2.4% fall in deal volume
compared with the previous quarter. After six straight quarters of decline, an uptick in funding, 1,643
albeit a tiny percentage, could present welcome news for startups in the coming quarters. 1,227 1,022
986
Despite negative news surrounding centralized exchanges like Binance and FTX, investors remain $5.3 $4.2
$3.2
$24.8 $29.2 $9.3
optimistic on centralized finance (CeFi) providers. With better user experience, these exchanges
and their associated wallets present the lowest barriers to adoption of crypto for retail users. 2018 2019 2020 2021 2022 2023*
During the quarter, centralized exchanges Swan Bitcoin and Blockchain.com raised two mega- Deal value ($B) Deal count
rounds at $165 million and $100 million, respectively. The largest deal of the quarter went to cross-
chain bridging protocol Wormhole—a $225 million early-stage round at a $2.5 billion post-money Source: PitchBook • Geography: Global • *As of December 31, 2023
valuation from Coinbase Ventures, Jump Trading, and ParaFi Capital. The only other megadeal of
the quarter went to Together.ai, developer of an open-source, decentralized cloud platform for
large foundation models. The startup raised a $102.5 million Series A led by Nvidia, Emergence,
Crypto VC exit activity
and Kleiner Perkins, putting the company’s pre-money valuation at $463.5 million. Together.ai is
part of the broader DePIN segment, covered in depth in our Q3 2023 Analyst Note: Decentralized
Physical Infrastructure Networks. We believe this segment will be one of the fastest-growing areas 77 77
70
in 2024 and will likely receive considerable investor interest.
41
37
24
$1.2 $0.3 $0.2 $88.0 $1.4 $1.0
2018 2019 2020 2021 2022 2023*
Exit value ($B) Exit count
Source: PitchBook • Geography: Global • *As of December 31, 2023
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 8
VC ACTIVITY
Key crypto early-stage VC deals in Q4 2023*
Post-money
Company Close date Deal value ($M) Segment Category Lead investor(s)
valuation ($M)
Wormhole November 29 $225.0 Blockchain networks Bridges & interoperability $2,500.0 N/A
Swan Bitcoin December 7 $165.0 Access Asset management & taxes N/A N/A
together.ai November 2 $102.5 Infrastructure & developer tools Data storage & accessibility $566.0 Emergence, Kleiner Perkins, Nvidia
Fnality International November 14 $94.8 Infrastructure & developer tools Institutional services N/A BNP Paribas, The Goldman Sachs Group
Credix November 14 $60.0 DeFi Lending, borrowing & yield generation N/A N/A
Andalusia Labs December 13 $48.0 Infrastructure & developer tools Security, risk management & compliance N/A Lightspeed Venture Partners
Blur November 2 $40.0 Web3 NFT platforms & collectibles N/A N/A
MultiChainz October 4 $35.0 DeFi Lending, borrowing & yield generation N/A N/A
Grape December 24 $35.0 Blockchain networks Layer 1 N/A N/A
Blockaid October 14 $33.0 Infrastructure & developer tools Security, risk management & compliance N/A Ribbit Capital, Variant Fund
Source: PitchBook • Geography: Global • *As of December 31, 2023
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 12
VC ACTIVITY
Key crypto late-stage VC deals in Q4 2023*
Post-money
Company Close date Deal value ($M) Segment Category Lead investor(s)
valuation ($M)
Upland October 20 $25.0 Web3 Metaverse & gaming $300.0 Animoca Brands, EOS Network Ventures
Finoa December 1 $16.2 Infrastructure & developer tools Institutional services $108.2 Balderton Capital, Maven 11
Mocaverse November 9 $11.9 Access Onboarding & payments N/A N/A
Lucent Block November 22 $11.3 DeFi Asset tokenization N/A N/A
Atoia Ventures, G1 Ventures, Good News
Coinchange November 30 $10.0 DeFi Lending, borrowing & yield generation N/A Ventures, K2 & Associates Investment
Management, Spirit Blockchain Capital
TripleA Technologies October 25 $10.0 Access Onboarding & payments N/A Peak XV Partners
Pocket Network November 30 $7.9 Web3 DePIN & hardware N/A N/A
AirDAO October 3 $7.5 Blockchain networks Layer 1 N/A N/A
Coin Metrics October 18 $6.7 Access Research & data tools N/A N/A
Rad November 28 $5.0 Web3 Content & social $35.0 Ayre Group, Intersect VC
Source: PitchBook • Geography: Global • *As of December 31, 2023
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 13
SELECT COMPANY HIGHLIGHTS: BABYLON
Key company information
Founded HQ location Total raised
2022 Palo Alto, US $25.7M
Overview
Last financing Last financing valuation Lead investor(s)
Raised $18.0M in a Series A N/A Polychain Capital, Hack VC
Babylon is a bitcoin-staking protocol that enables BTC staking, allowing bitcoin holders to stake
their idle bitcoins to secure proof-of-stake (PoS) chains while earning yield. This integrates bitcoin,
a proof-of-work chain and the most widely held crypto asset, with the PoS economy. The core
technology of Babylon revolves around a bitcoin-staking protocol that facilitates trustless staking
of bitcoin without needing to bridge them to a PoS chain. This protocol is designed to provide full
slashable security guarantees to the PoS chains and support fast-stake unbonding to maximize
liquidity for bitcoin holders. The protocol is modular and can be implemented on top of various
PoS consensus algorithms, serving as a foundation for future restaking protocols. Babylon’s system
architecture uses Cosmos-SDK, which will act as a control plane to synchronize interactions Exit Predictor
between bitcoin and the PoS chains. This architecture efficiently aggregates timestamps for
numerous Cosmos software development kit (SDK) chains, offering decentralized, secure,
censorship-resistant, and scalable solutions.
IPO: 2% probability M&A: 74% probability No exit: 24% probability
Success: 76% probability
Note: Probability data based on PitchBook VC Exit Predictor Methodology.
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 26
SELECT COMPANY HIGHLIGHTS: BABYLON
The development of Babylon is partly influenced by EigenLayer’s ethereum restaking concept. Financing history
EigenLayer’s is a restaking protocol that involves taking staked ETH on ethereum and restaking it to
secure middleware such as data availability layers, bridges, oracle services, and more. EigenLayer Babylon raised an $18.0 million Series A in December 2023 in a deal led by Polychain Capital and
on ethereum raised significant VC in a $71.1 million Series A in 2023. The bitcoin-staking protocol Hack VC. OKX Ventures, Polygon, Breyer Capital, Framework Ventures, Castle Island Ventures, and
follows a remote staking approach similar to EigenLayer’s protocol, wherein the staked assets are other investors participated in the round. The company previously raised a $7.7 million seed round
locked in a contract on the bitcoin chain and then slashed in the event of a protocol violation on in August 2022 from DHVC, Continue Capital, Dragon Roark, and a few other investors.
the PoS chain. However, because bitcoin does not natively support smart contracts, Babylon has
designed advanced cryptography and consensus protocols, and optimized the use of bitcoin’s
scripting language to interact with smart contracts.
Leadership
Babylon was co-founded by David Tse and Fisher Yu. Tse spent the previous three decades
teaching in the electrical engineering departments at Stanford University and the University of
California, Berkeley. Tse’s research revolves around information theory, computational genomics,
machine learning, and blockchains. Yu is Babylon’s chief technology officer and was previously a
managing director at Hash Labs, a blockchain security consulting and R&D service to blockchain
projects such as XDC networks and IOHK. Previously, Yu was an engineer at Dolby Laboratories
and received a Ph.D. in telecommunications at the Australian National University. Shalini Wood is
Babylon’s chief marketing officer (CMO) and was previously the CMO at e-Money, a blockchain-
based payment platform built on Cosmos.
Q4 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 27
PitchBook Data, Inc.
John Gabbert Founder, CEO
Nizar Tarhuni Vice President, Institutional Research and Editorial
Paul Condra Head of Emerging Technology Research
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