According to Cointelegraph: Crypto startups attracted $2.7 billion in venture capital funding in Q2 2024, marking a slight increase from Q1, even as the total number of deals decreased, according to data from Pitchbook. The report, published on August 9, revealed a 2.5% increase in total invested capital, despite a 12.5% drop in the number of deals compared to the previous quarter.

Infrastructure Projects Lead in Venture Capital Funding

Infrastructure projects dominated Q2 funding, with several major players securing significant capital. Layer-1 platform Monad raised $225 million in a Series A funding round, DeFi protocol BeraChain — which introduced a new proof-of-liquidity model — secured $100 million in a Series B round, and Bitcoin restaking platform Babylon garnered $70 million in early-stage funding.

Pitchbook also highlighted two "mega-rounds" during the quarter. Decentralized social media protocol Farcaster raised $150 million in a Series A round, reaching a $1 billion post-money valuation, while blockchain gaming platform Zentry secured $140 million in early-stage funding.

Crypto venture capital has slowed considerably in 2024 compared to 2021 and 2022. Source: Pitchbook

Investor Sentiment and Future Outlook

Despite the reduced number of deals, the increase in total capital raised suggests growing confidence among institutional investors in the crypto market. "With positive investor sentiment returning to crypto and barring any major market downturns, we expect the volume and pace of investments to continue increasing throughout the year," Pitchbook noted.

However, the report also emphasized that funding for crypto startups has slowed significantly over the past 18 months, following a peak in 2021 and 2022, when $25.3 billion and $29.4 billion were raised, respectively. In 2023, total investment in crypto firms reached $10.1 billion, with 2024 on track to slightly surpass this figure, potentially reaching $10.8 billion.

More than $102 billion has been raised by crypto projects since 2014. Source: DeFiLamma

Shifting Dynamics in Startup Funding Rounds

The report noted that the competition among crypto startups has become more intense at earlier fundraising stages but has eased at later stages. This trend reflects a broader industry shift as venture capital firms become more selective in their investments.

Since June 2014, the blockchain industry has seen over $102 billion in funding across 5,400 rounds, according to DefiLlama data. This extensive investment underscores the long-term commitment to the sector, despite recent slowdowns.

Looking Ahead: New Crypto Funds on the Horizon

The report comes shortly after venture capital firms Pantera Capital and Paradigm announced plans to raise $1 billion and $850 million, respectively, for new crypto funds. If successful, Pantera Capital's $1 billion raise would be the largest in the cryptocurrency industry since May 2022, when Andreessen Horowitz (a16z) raised a record $4.5 billion.

Although a16z raised $7.2 billion in May 2024 for investments in various technology sectors, including artificial intelligence and gaming, the firm opted not to add to its cryptocurrency-focused fund, signalling a cautious approach to the volatile crypto market.