Bloomberg reported Wednesday that following a year of collapsing asset prices and plummeting market capitalization, scandals, bank implosions, and regulatory uncertainty, private funding in crypto startups has dropped precipitously this year according to data from research company PitchBook.

In the first quarter of 2023, globally, venture capital (VC) funding for crypto startups was equivalent to $2.4 billion, hitting its lowest level since 2020, according to PitchBook data. That marks an 80% fall in private VC investment in comparison to the all-time high recorded last year in the same period, of $12.3 billion.

A large part of the slump can be attributed to the collapse of crypto exchange FTX, which significantly spooked potential investors in the sector. Paranoid investors now require months of research into ventures, with an incredible degree of scrutiny before committing to any decisions, causing deals to become slower to convert into capital.

PitchBook analyst Robert Le said, “It’s not going to be based on FOMO [fear of missing out] or what other investors are doing.”

Luca, Prosperi, the co-founder of the Berlin-based startup M^Zero Labs, said that although his company began its fundraising talks with investors in October, right before the collapse of FTX, it was only this month he was able to close on $22.5 million in funding.

Prosperi noted, that the collapse of such a large and well-respected cryptocurrency exchange as FTX “forced investors to keep asking more questions.”

Le said the retreat in funding for crypto projects was “not a surprise,” noting it did not help when Silicon Valley Bank collapsed. The bank had held deposits for a large number of venture-backed companies, whose deposits were so large they would have been uninsured. Many companies, regardless of viability, were suddenly at risk of insolvency themselves, due merely to the bank’s failure.

Le added, “there’s still a lot of fear about what’s going to happen since the macro environment is still very uncertain.”