Crypto Startups Raised More Money but Show Slowdown in Q2 2024

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As a seasoned crypto investor with over a decade of experience navigating the volatile and ever-evolving digital asset landscape, I find myself intrigued by the latest trends unfolding in this dynamic sector. The recent data showing an increase in funding for cryptocurrency startups despite fewer deals being completed is indeed interesting.

In the final three months of last year, cryptocurrency startups received significantly more funding, but fewer deals were finalized. Specifically, venture capital firms invested approximately $2.7 billion in crypto-focused startups during the June quarter, marking a 2.5% increase from the first quarter and a robust 9.8% rise compared to Q2 of 2023.

Compared to Q1 this year, there was a 12.5% decrease in the total number of deals in Q2. This indicates a market slowdown as investors appear to be more selective with their new investment choices.

Following Bitcoin‘s price reaching an all-time peak in Q1, the broader cryptocurrency market encountered a tough stretch. Historically, the crypto market tends to go through a period of tight consolidation and subsequent decline after the Bitcoin halving event.

As someone who has closely followed the cryptocurrency market for several years now, I have witnessed firsthand the ebb and flow of investor interest in Bitcoin ETFs. Recently, according to a report by Bloomberg, we saw a significant slowdown in investor inflows during Q2 2024, with only $2.8 billion flowing into spot Bitcoin ETFs compared to $13.7 billion in the previous quarter – a staggering decline of over 80%.

As a researcher studying venture capital investments in cryptocurrency, I’ve noticed an interesting pattern. Although we’re still quite far from the peak levels seen in early 2021 and the start of 2022, there was a noticeable surge in VC investment activity in March and April this year, reminiscent of a feverish pace. However, later stages of investment have remained relatively soft. As the market shifted in late April and carried into May, the venture capital market once again showed signs of slowing down.

For three consecutive quarters now, crypto startups have managed to secure more funding than the quarter before, as indicated by a recent report published by senior analyst Robert Le at PitchBook. This trend suggests that the improvement in token prices this year, coupled with increasing institutional interest in digital assets, could potentially lead to further increases in fundraising activities.

Increasing Valuation of Crypto Startups

During the second quarter, values increased significantly due to founders capitalizing on the active secondary markets. Despite this, investors showed selectiveness when it came to investing in crypto infrastructure projects like developing new blockchains. Nevertheless, certain venture capitalists showed a preference for backing consumer-oriented applications.

Shuyao Kong, one of the founders at MegaETH – a pioneering blockchain company – managed to gather $20 million during their initial funding round in June. According to Kong, this success can be attributed to the fact that the market is still showing a significant demand for robust and efficient blockchain solutions, as it continues to be eagerly seeking them out.

In May, Farcaster, a unique social media platform operating within the crypto application sector, was the sole recipient of a substantial $150 million investment. Venture capitalists (VCs) foresee a decline in infrastructure investment enthusiasm, leading them to prioritize opportunities found within application development instead.

“Tarun Chitra, a partner at Robot Ventures, noted a shift in private investments, moving from infrastructure projects to application development. Currently, there’s high demand for applications, but fewer viable options for private investment in the market.”

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2024-08-12 14:10