Record-breaking $2.4B Fueled into Crypto Startups in 2024

The first quarter of 2024 has brought positive news for crypto and blockchain startups, as venture capital investment in these industries has experienced a significant increase. According to data from Galaxy Research, investors poured a total of $2.49 billion into 603 deals during this period. This represents a 29% surge in funding and a 68% rise in the number of deals compared to the previous quarter. It is important to note that sustained growth over subsequent quarters is required to confirm a recovery in the market.

Various factors have contributed to the improved investment dynamics in this quarter. The introduction of Bitcoin exchange-traded funds (ETFs) has played a role, along with innovations in areas such as restaking, modularity, and Bitcoin layer-2 solutions. Macroeconomic factors such as interest rates have also influenced investment trends. It is worth mentioning that the correlation between Bitcoin prices and venture capital investments has weakened in the past year. While Bitcoin prices have increased significantly, venture capital activity remained stagnant until the recent surge in early 2024. Investment levels have not yet reached the heights seen when Bitcoin surpassed $60,000.

Interestingly, the majority of capital invested in the first quarter went to early-stage startups, with 80% of the total funding allocated to this category. Conversely, later-stage companies faced more challenging conditions, as many large and general venture capital firms have either exited the sector or significantly reduced their investments.

The infrastructure sector dominated investment activity during this period, accounting for 24% of the total capital raised. A notable example is EigenLayer’s $100 million funding round. The Web3 sector and trading sector captured 21% and 17% of the total capital, respectively.

In terms of geography, the United States remained the dominant force in the crypto venture space. American startups were involved in 37.3% of all deals and received 42.9% of the invested capital. Singapore came in second with 10.8% of the total deal count, followed by the United Kingdom with 10.2%, Switzerland with 3.5%, and Hong Kong with 3.2%.

Despite the positive news, fundraising conditions in the industry remain challenging. Macroeconomic conditions and regulatory uncertainties continue to weigh on venture capitalists, making it difficult to raise funds. Initially, investors anticipated significant interest rate cuts in 2024, but strong inflation data in the first quarter has tempered these expectations.