Venture Capital Interest in Crypto Remains High Despite Fewer Deals

Venture capitalists invested more in cryptocurrency last quarter, though the number of deals declined, according to PitchBook’s latest quarterly report.

In the first quarter of the year, crypto fundraising increased by 2.5%, reaching $2.7 billion across 503 deals. Despite this rise in total investment, the number of deals dropped by 12.5%, indicating a more selective approach by investors.

“Investors are focusing their capital on a narrower range of opportunities,” said Robert Le, PitchBook’s senior analyst for emerging technology. “There’s a flight to quality, with investments now being more concentrated than in previous years.”

The largest deals in Q2 included $225 million for layer-1 platform Monad, $100 million for layer-1 platform Berachain, and $70 million for bitcoin restaking platform Babylon. Farcaster, a decentralized social network, secured $150 million in Series A funding, while blockchain-based gaming platform Zentry raised $140 million in an early-stage round. Fundraising efforts were notably concentrated in infrastructure, such as scaling solutions and financial services.

Le anticipates that overall fundraising for 2024 could increase by 20% or more, projecting a total of $12-$14 billion compared to approximately $10 billion last year.

Looking ahead, Le expects consolidation in the blockchain sector, though not in the traditional sense of mergers and acquisitions. With over 150 layer 1 and layer 2 blockchains currently active, he predicts that only three to five will dominate developer and user activity in the long term. “There are too many L1s and L2s. Solana, Bitcoin, Optimism, Arbitrum, and Base are likely to emerge as the main players,” he stated.

Many of the lesser-known blockchains may become “zombie chains,” with minimal user engagement. However, Le highlighted decentralized physical infrastructure (DePIN) as a potential standout sector, noting its appeal to non-crypto native users. “DePIN could become one of the strongest narratives this cycle, especially as it attracts interest from outside the crypto community,” he said.

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