• Venture capital investments in crypto startups reached $2.49 billion across 603 deals in the first quarter of 2024, a 29% increase in funding and a 68% rise in deal count from the previous quarter.
• The infrastructure sector accounted for 24% of the total capital raised, while Web3 and trading sectors captured 21% and 17%, respectively.
• The United States remained the dominant force, with American startups involved in 37.3% of all deals and capturing 42.9% of the invested capital.
Venture capital investment in crypto and blockchain startups saw significant growth in Q1 2024 after three consecutive quarters of decline, according to new data from Galaxy Research. Investors injected $2.49 billion across 603 deals, representing a 29% increase in funding and a 68% rise in deal count quarter-over-quarter. The data may signal the bottom was reached in Q4 2023, but more consistent growth is needed to confirm a sustained recovery.
Key Factors Influencing Investments
Several dynamics influenced the rise in investment this quarter, including:
- Introduction of Bitcoin ETFs
- Innovations in areas like restaking modularity and Bitcoin layer-2 solutions
- Macroeconomic factors like interest rates
Investment Trends
The historical correlation between Bitcoin prices and crypto startup investments has weakened over the past year. While Bitcoin prices have risen considerably, venture capital activity remained stagnant until the recent Q1 surge. However, investment levels are still below those reached when Bitcoin previously exceeded $60,000.
In addition, 80% of invested capital in Q1 went to early-stage startups. In contrast, later-stage companies faced tougher conditions as many larger VC firms have exited the sector or cut back investments substantially.
Breakdown of Investments
Infrastructure captured 24% of total capital raised, including EigenLayer’s $100 million funding round. Web3 and trading sectors took 21% and 17% of total capital respectively.
Geographically, the U.S. dominated with 373 deals and 42.9% of capital. Singapore followed with 10.8% of deals, while the U.K., Switzerland and Hong Kong rounded out the top 5.
Fundraising Outlook
Galaxy notes fundraising conditions remain challenging, with macroeconomic uncertainties weighing on the industry. Investors’ expectations for interest rate cuts have tempered, maintaining a difficult environment for crypto startup fundraising.
Conclusion
After a long crypto winter, the Q1 data provides a glimmer of hope for a recovery in startup investment. But continued growth is needed to confirm the bottom is in. Macroeconomic conditions continue to create headwinds.
