Crypto VC funding hits $2.7b despite 12.5% drop in deal volume

While still well below early 2022 highs, Q2 marked the third consecutive quarterly increase in the total value of crypto investments.

Venture capital investments in the crypto space continued to grow in the second quarter, marking the third consecutive quarter of increases as the market shows signs of gradual recovery.

Through the end of June, crypto venture capital deals reached $2.7 billion in the three-month period, representing a 2.5% increase from Q1. However, Bloomberg reports that this figure reflects a decrease of approximately 10% compared to Q2 2023, citing data from analytics firm PitchBook. The number of deals closed in Q2 was also down 12.5% ​​from the previous quarter.

VC investors interviewed by Bloomberg said the cryptocurrency funding market is far from its historic highs, while recent trends point to a cooling period as market prices become increasingly dependent on the broader macroeconomic environment.

Dragonfly general partner Rob Hadick noted that funding volumes are “still well below the peaks of 2021 and early 2022,” and noted that VC investment in crypto “hit a bit of a fever pitch in March and April.” “The later stages continued to be soft, and as the market turned in late April and May, the VC market slowed down again,” Hadick added.

Crypto VC deals in Q2 look more conservative

As the funding environment cools, investors appear less inclined to make risky investments and are focusing more on general solutions rather than specific applications. Robert Le, senior analyst at PitchBook, noted that investors continue to back infrastructure projects that collectively raised hundreds of millions of dollars in Q2.

As Crypto.news previously reported, a study by Galaxy Research shows that approximately 80% of venture capital funding in the first quarter of 2024 will be allocated to early-stage companies, with the remaining 20% ​​allocated to later-stage companies.

Despite the waning interest from large mainstream VC firms, crypto-focused early-stage venture funds have remained active, although many have exited the crypto space or significantly scaled back their investments. Still holding capital from their 2021 and 2022 fundraising rounds, these funds continue to support promising early-stage crypto startups. However, later-stage startups face increasing challenges in raising capital due to the waning participation of larger VC players.