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

While still far 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 increase as the market shows signs of a gradual recovery.

By the end of June, crypto venture capital deals reached $2.7 billion over the three-month period, representing a 2.5% rise from the first quarter. However, this figure reflects nearly a 10% decline compared to Q2 2023, Bloomberg reports, citing data from analytical firm PitchBook. The number of deals closed in Q2 also dropped by 12.5% compared to the previous quarter.

VC investors interviewed by Bloomberg indicated that while the crypto funding market remains far from its historical highs, recent trends suggest a cooling period as market prices increasingly depend on the broader macroeconomic environment.

Dragonfly’s general partner Rob Hadick noted that funding volumes are “still far below the 2021 and early 2022 highs,” and highlighted that VC investing in crypto “reached somewhat of a fever pitch in March and April.” He added, “Later stages have continued to be soft and as the market turned in late April and into May, the VC market slowed again.”

Crypto VC deals in Q2 appear to be more conservative

As the funding environment cools, investors seem less inclined toward risky investments, with a greater focus on general solutions rather than specific applications. Robert Le, senior analyst at PitchBook, pointed out that investors continued to back infrastructure projects, which collectively raised hundreds of millions of dollars in Q2.

As crypto.news reported earlier, a study from Galaxy Research shows that in Q1 2024, approximately 80% of venture capital funding was allocated to early-stage companies, with the remaining 20% going to later-stage firms.

Despite waning interest from large generalist VC firms, many of which have either exited the crypto sector or significantly reduced their investments, crypto-focused early-stage venture funds have remained active. These funds, still holding capital from their 2021 and 2022 fundraising rounds, continue to support promising early-stage crypto startups. However, later-stage startups face increased challenges in securing capital due to the reduced involvement of larger VC players.