Venture Capitalists Maintain Interest in Crypto Despite Market Lull
Venture capitalists are maintaining their interest in the crypto sector, despite a market lull, according to a recent report by Galaxy Digital. In the second quarter of the year, crypto startups raised $3.2 billion, which is a 28% increase from the $2.5 billion raised in the previous quarter.
Web3 Projects Attract Significant Funding
Within the $3.2 billion investment, a notable portion went to web3 projects. Startups in web3, decentralized autonomous organizations (DAOs), the metaverse, and gaming received 24% of the VC capital, amounting to $758 million. The largest raise in this category was the $150 million secured by Farcaster, a social media protocol.
Layer 1 and Bitcoin Layer 2 Projects Garner Attention
Layer 1 projects and Bitcoin layer 2 solutions also drew substantial investments. Monad Labs raised $225 million to build a faster version of Ethereum compatible with its coding language, marking the largest funding round of the quarter. Berachain, a layer 1 project, secured $100 million at a valuation of $1.5 billion. Investor interest in Bitcoin layer 2 solutions, which aim to improve transaction efficiency on the Bitcoin blockchain, showed significant growth.
Early-Stage Investments Dominate
The report highlighted a total of 577 crypto deals in the second quarter, with early-stage investments making up nearly 80% of total funding. This trend follows an earlier rebound in venture capital interest aligned with the rise in crypto prices, despite Bitcoin reaching an all-time high in March and the broader market’s focus on AI developments.
Crypto Startup Funding Surpasses $100 Billion
Over the past decade, crypto startups have seen a surge in funding, surpassing $100 billion since May 2014. The peak of cryptocurrency startup funding occurred in October 2021, with over $7 billion raised. The second-highest funding was in February 2022, totaling $3.67 billion. Recent research shows that nearly half of all cryptocurrency funding comes from U.S. investors, with the UK and Singapore accounting for 7.7% and 5.7%, respectively, in the second quarter of 2023.
High-Profile Funding Deals
Between late 2023 and the first half of 2024, several high-profile funding deals took place. Together.AI and cross-chain protocol Wormhole each secured $225 million. Open-source cloud storage firm Totter and Eigenlayer raised $101 million and $100 million, respectively. Other notable funding rounds include Swan Bitcoin’s $165 million and Blockchain.com’s $110 million. These substantial investments underscore the continued confidence and interest in the cryptocurrency industry.
Overall, the report suggests that while venture capital sentiment in the crypto sector is improving, it has yet to match the broader market’s enthusiasm, particularly as Silicon Valley remains focused on AI-related developments.
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