According to Blockworks, crypto firms are raising significant venture capital funding, though the levels are not comparable to the peak of the 2022 cycle. To match the 2022 funding levels, which were around $23 billion to $24 billion, PitchBook Senior Analyst Robert Le suggests that such figures are unlikely to be reached this year or next. He predicts that it could take 3-5 years to see similar levels of investment again, indicating a longer-term trend.

Jacob Martin, general partner at seed-stage venture firm 2 Punks, expressed skepticism about returning to 2022 funding levels, citing a different general environment now compared to back then. Martin also pointed out that crypto has a branding problem, which affects the ability of some projects to attract a user base despite looking promising on paper. This issue is not universal but remains a challenge for venture capitalists.

An example highlighted is Farcaster, a potential social media platform that attracted around $150 million in VC funding last quarter. However, PitchBook’s second-quarter study found that Farcaster has primarily attracted crypto-native users and has not yet expanded beyond that demographic. Currently, VC money is heavily focused on blockchain infrastructure rather than the application layer. Le believes that significant investments will occur once applications start serving end users, whether they are retail consumers or businesses.

Le compared the current investment trend to investing in Amazon Web Services (AWS) rather than the companies built on AWS, such as Uber, Airbnb, and Meta (formerly Facebook). He anticipates a surge in investments when applications begin to serve end users effectively. One area Le is closely monitoring is decentralized GPU networks, especially with the rising demand for computing resources driven by AI. The availability of computational power is a significant bottleneck for training large-scale AI models, and Le is exploring the intersection between AI and blockchain as interest in this segment grows.