Crypto startups defied a downturn in venture capital deals by raising more funds in the second quarter of 2024 than in the first, according to a Pitchbook report released on August 9. Despite a 12.5% drop in deal volume, total invested capital rose by 2.5% in Q2, signaling growing confidence among institutional investors in the cryptocurrency space.
This shift reflects renewed optimism, even amidst broader financial uncertainty. Pitchbook’s analysis suggests that this trend could lead to a sustained uptick in investment activity throughout the year, as long as there are no major market disruptions.
“With investor confidence returning to crypto, and barring any significant market setbacks, we anticipate continued growth in the volume and pace of investments through the remainder of the year,” the report states.
A key trend in Q2 was the emphasis on infrastructure projects, which attracted substantial funding. Monad, a layer-1 platform, led the way with a $225 million Series A raise. DeFi protocol BeraChain secured $100 million in a Series B round, pioneering a new proof-of-liquidity model. Bitcoin restaking platform Babylon also raised $70 million in early-stage funding.
The quarter also saw two major “mega-rounds”: decentralized social media protocol Farcaster raised $150 million in a Series A, achieving a $1 billion valuation, and blockchain gaming platform Zentry secured $140 million in early-stage financing.
However, the report acknowledges that overall funding for crypto startups has slowed compared to the record-breaking years of 2021 and 2022. During those years, the industry raised $25.3 billion and $29.4 billion, respectively. In contrast, 2023 saw just $10.1 billion in investments, with 2024 on track to reach approximately $10.8 billion.
The competitive landscape has also shifted. While early-stage rounds have become increasingly competitive, later-stage rounds have seen less activity, indicating that while new ventures are gaining traction, securing long-term backing remains challenging.
This report follows major fundraising efforts by top venture capital firms. Pantera Capital and Paradigm, for example, are targeting $1 billion and $850 million, respectively, for new crypto-focused funds. If Pantera reaches its goal, it would mark the largest cryptocurrency fundraise since Andreessen Horowitz’s (a16z) record $4.5 billion raise in May 2022.
Interestingly, a16z, which raised $7.2 billion in May 2024 for investments across various tech sectors, including AI and gaming, chose not to expand its crypto-focused fund, reflecting a more cautious stance toward the volatile crypto market.