Coinspeaker
VC Investment in Crypto Finally Up in 2024 but Numbers Are Disappointing
In the first quarter of 2024, the crypto sector saw a notable uptick in venture capital (VC) funding. A recent report by renowned research firm PitchBook reveals that startups secured a total of $2.4 billion across 518 deals, representing a 40.3% increase in invested capital and a 44.7% rise in deal volume compared to the previous quarter.
The largest deal of the quarter was claimed by Together AI, an open-source decentralized cloud platform developer for large foundation models. Together AI raised $106 million in an early-stage round led by Salesforce Ventures, reaching a pre-money valuation of $1.1 billion. This follows closely on the heels of its $102.5 million Series A funding at a pre-money valuation of $463.5 million just last quarter.
However, infrastructure startups led the funding wave, with Ethereum restaking platform EigenLayer raising $100 million in a Series B round. Fully homomorphic encryption (FHE) development platform Zama also contributed to this success by securing $73 million in a Series A round.
PitchBook states that if no major market downturns occur, this positive sentiment could continue to bolster the volume and pace of investments throughout the year.
VC Investment Projected: $12B or $21B
Despite the quarterly gains, the overall pace of VC investments into crypto projects has slowed down compared to the explosive growth seen in 2020 and 2021. According to PitchBook’s crypto analyst, Robert Le, VC investments in crypto are projected to reach $12 billion in 2024. This marks only a modest 2.4% increase from the $9.4 billion raised last year, despite Bitcoin reaching new highs.
According to PicthBook, the crypto market has experienced a 70% drop in investments from 2022 to 2023. This decline can be attributed to high-profile scandals such as the collapse of FTX and the Terra crash, which dampened investor enthusiasm.
Le noted that many generalist investors, who suffered losses from previous crypto investments, have not yet returned to the market, contributing to the reduced investments. Moreover, persistent inflation has limited the disposable income of retail investors, making them less likely to invest in riskier assets like Bitcoin.
However, Le suggested that a reduction in interest rates by the US central bank could potentially ignite a surge in crypto investments. If such a scenario unfolds, VC investments could increase by as much as 60% quarter over quarter, potentially pushing the year’s total to around $21 billion.
Notably, future VC investment sentiment also depends on regulatory developments and political outcomes. The upcoming US presidential election, with Donald Trump and Joe Biden holding opposing views on cryptocurrency regulation, could significantly impact the regulatory landscape.
Trump, who is more pro-crypto, contrasts with Biden’s stance, which aligns with the stringent regulatory approach of SEC Chair Gary Gensler. According to Mike Giampapa, general partner at Galaxy Ventures, a Republican victory could foster a more favorable environment for the crypto industry, possibly leading to an increase in investments.
VC Investment in Crypto Finally Up in 2024 but Numbers Are Disappointing
