Venture capital investors are showing continued interest in the cryptocurrency sector with a surge in venture capital (VC) funding, challenging the market’s doldrums, according to a recent report published by Galaxy Digital.
In the second quarter of the year, crypto startups managed to raise an impressive 3.2 billion USD in VC funding. This represents a 28% increase from the 2.5 billion USD raised in the previous quarter.
While this figure is still substantially far from the nearly 10 billion USD invested in crypto projects during Q2 2022, the report indicates that “venture capital sentiment towards crypto continues to improve.”
The revival of interest from venture capital investors in the cryptocurrency sector follows a trend seen earlier this year, which aligned with the rise in cryptocurrency prices.
However, despite Bitcoin hitting an all-time high in March, cryptocurrency investors have not kept up with the broader market’s enthusiasm, especially as Silicon Valley remains preoccupied with AI-related developments.
Web3 projects attract significant amount of funding
Of the 3.2 billion USD invested in the cryptocurrency sector, a significant portion was allocated to web3 projects.
Startups involved in web3, decentralized autonomous organizations (DAOs), metaverse, and gaming captured 24% of venture capital funding, totaling 758 million USD.
Notably, the largest raise in this category was 150 million USD secured by Farcaster, a social media protocol. Bitcoin layer-1 projects and layer-2 solutions also attracted substantial capital, as indicated by Galaxy Digital.
Monad Labs, aiming to build a faster version of Ethereum compatible with the Ethereum coding language, has raised 225 million USD, making it the largest funding round of the quarter.
Additionally, according to Bloomberg, Berachain, a layer-1 project, has secured 100 million USD at a 1.5 billion USD valuation.
Investor interest in Bitcoin layer 2 solutions, which aim to facilitate more efficient transaction processing on the Bitcoin blockchain, has also witnessed significant growth.
In short, the report highlighted a total of 577 cryptocurrency deals in Q2, with early-stage investments accounting for nearly 80% of the total funding.
Cryptocurrency seed VC funding surpasses 100 billion USD
Undeniably, cryptocurrency startups have seen a significant increase in funding over the past decade, surpassing an impressive 100 billion USD mark since May 2014.
Crypto startup funding peaked in October 2021, with over 7 billion USD raised that month. The second-largest funding on record occurred in February 2022, totaling 3.67 billion USD.
Furthermore, recent research indicates that nearly half of all cryptocurrency funding comes from investors in the United States.
The remaining VC funding is spread across several countries, with the UK accounting for 7.7% and Singapore 5.7%. This is based on figures from Q2 2023.
Notably, a number of high-profile financing deals took place between late 2023 and the first half of 2024.
Together.AI and cross-chain protocol Wormhole secured 225 million USD in investments each, while open-source cloud storage company Totter and Eigenlayer raised 101 million USD and 100 million USD, respectively.
Other notable funding rounds include Swan Bitcoin raising 165 million USD and Blockchain.com raising 110 million USD.
These substantial investments highlight the continued confidence and interest in the cryptocurrency sector.
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