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Bitcoin continued to outperform traditional assets with an impressive 84% H1 2023 gain, surpassing indices like the S&P 500 and NASDAQ, as well as precious metals like gold and silver.
Web3 venture capital investment continued to decline, with a median pre-money valuation of $17.93 million, the lowest since Q1 2021.
Ethereum successfully completed the Shanghai upgrade, allowing validators to withdraw their staked ether (ETH) that has been locked in the network.
Q2 witnessed heightened regulatory focus, with key figures like Gary Gensler facing Congress, Coinbase embroiled in several legal battles, and the EU passing MiCA regulation.
Renowned firms filed for spot Bitcoin ETFs, awaiting regulatory approval for these investment products.



The Q2 crypto market experienced significant fluctuations, beginning with a decline in April, followed by a notable rise in market cap in May, and ultimately concluding with a relatively subdued June. During this period, the cryptocurrency landscape experienced a mixed performance among large-cap tokens. Many faced challenges stemming from SEC scrutiny and legal battles, impacting several top-100 tokens. Despite this turbulence, Bitcoin emerged as a strong performer in Q2. This performance was primarily driven by news related to ETFs and institutional listings.

Bitcoin notably outperformed traditional financial assets in the first half of 2023, showcasing an impressive gain of 84%. In contrast, established indices like the S&P 500 and NASDAQ posted gains of 15% and 31%, respectively. Additionally, Bitcoin's performance eclipsed that of precious metals, with gold showing a modest 4% increase and silver experiencing a 5% decrease in the same period.

Bitcoin Performance H1 2023

The crypto market's landscape wasn't uniform, with many blockchains witnessing a decline in Total Value Locked (TVL) due to price drops in Q2. For example, Binance's regulatory challenges with the SEC and European regulators significantly impacted BNB Chain's TVL. Conversely, the second quarter saw the emergence of promising Layer 2 blockchains, with Polygon zkEVM leading the way with an astounding 3,617% increase in TVL. Other Layer 2 solutions, such as zkSync Era and StarkNet, also exhibited substantial growth. Additionally, the rise of Liquid Staking Derivatives (LSD) protocols, particularly in Ethereum, Solana, and Klaytn, offers benefits to delegators and validators, which ultimately contributes to network stability and performance.



Despite the ongoing bear market conditions, Web3 VC activity demonstrated resilience compared to previous downturns. Deal counts remained robust, and total capital invested remained relatively stable, indicating sustained interest from investors.

Crypto VC Deal Count & Capital Invested

In Q2 2023, only $720 million was raised by ten new Web3 VC funds, marking the lowest amount since Q3 2020. This reflected the broader trend of waning appetite for long-tail risk assets amid rising interest rates and a legacy of failed ventures from the previous year.

The United States continued to dominate the Web3 startup ecosystem, with over 43% of all deals and more than 45% of total capital invested in Q2 originating from U.S.-based firms. Despite regulatory challenges, the U.S. maintained its leadership in Web3 innovation and investment.

The distribution of VC capital varied across different Web3 sectors. NFTs, Gaming, DAOs, and Metaverse companies led in deal count, reflecting the ongoing trend of decentralized applications and virtual experiences. Meanwhile, Trading and Exchange startups attracted the most capital, emphasizing the importance of infrastructure and market access in the crypto industry.

Crypto VC Valuation & Deal Size



In a quarter marked by regulatory and legal developments, the crypto industry also witnessed significant advancements in blockchain technology. Ethereum successfully completed the Shanghai upgrade, ushering in a new era for the network. This upgrade brings several key changes designed to enhance Ethereum's functionality and user experience.

One of the notable changes is a reduction in gas fees for layer-2 solutions such as Polygon and Optimism. This reduction in transaction costs is a welcome development for users and developers seeking cost-effective solutions on the Ethereum network. Additionally, the Shanghai upgrade introduces the ability for users to access and unstake their Ethereum tokens that were previously locked in a smart contract when they became validators on the proof-of-stake-based Ethereum Beacon Chain. This newfound flexibility allows users to manage their staked ETH tokens more efficiently.


Mysten Labs, the development team behind the SUI blockchain, celebrated the launch of its mainnet in May. SUI is a layer-1 blockchain developed by former Meta employees, operating on a proof-of-stake consensus model and employing the Move programming language, originally intended for Meta's Diem project.

The SUI blockchain demonstrated impressive performance during its testnet phase, boasting high throughputs ranging from 10,871 transactions per second (TPS) to 297,000 TPS on various workloads. For context, Solana, known for its high-speed transactions, maintains a TPS of approximately 4,000.

While the SUI blockchain has made substantial progress, some challenges remain in terms of decentralization, with the majority of nodes concentrated in Germany and the U.S. However, as the network matures, it is expected that the distribution of validators will become more widespread. Additionally, the distribution of token holders is yet to be fully clarified.

Mysten Labs' ability to secure its significant $300 million VC investment pre-launch back in September 2022 draws parallels with Aptos, another blockchain backed by major VC players. Both projects share roots in Meta's Diem project and leverage the Move programming language developed at Meta.

As the blockchain industry continues to evolve, these developments in Ethereum and SUI reflect the ongoing pursuit of innovation and scalability, bringing forth promising opportunities for users and developers alike.



In the second quarter of 2023, the crypto industry witnessed a flurry of regulatory and legal developments. Leading the charge was Gary Gensler, the SEC chairman, whose stance on crypto companies drew mixed reactions from Congress. Notably, Gensler refrained from classifying Ethereum (ETH) as a security, even as he labeled the majority of crypto entities as non-compliant.

Internationally, the European Union Parliament made a groundbreaking move by endorsing the MiCA regulation. This regulation introduced an extensive framework for crypto licensing and fund transfers. Meanwhile, in the United States, the House Financial Services Committee unveiled a comprehensive 73-page draft of a stablecoin bill, underlining the government's growing interest in regulating digital currencies.

In the world of crypto exchanges, Binance faced a series of challenges, including investigations in France, withdrawal issues, staff layoffs, and allegations of fund commingling. Simultaneously, the SEC initiated lawsuits against both Coinbase and Binance, accusing them of offering unregistered securities.

Adding to the regulatory landscape, Cross River Bank received a cease-and-desist order from the FDIC due to unsound lending practices, highlighting the heightened regulatory scrutiny within the banking sector.

Furthermore, major financial players, such as BlackRock, WisdomTree, Invesco, Valkyrie, Bitwise, and Fidelity, threw their hats into the ring by filing for spot Bitcoin ETFs, awaiting regulatory decisions that could potentially reshape the cryptoasset investment landscape. It's worth noting that with a maximum 240-day window available for the SEC to delay crypto ETF applications, some firms could wait until March 2024 to hear decisions on filings.

Sources: CoinMarketCap, Cryptorank, Galaxy Research, PitchBook Data


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