In Q1 2024, cryptocurrency and blockchain firms saw a significant increase in venture capital investment, reaching $2.49B across 603 projects.
Following three consecutive quarters of a drop in investment, cryptocurrency and blockchain firms have seen a significant increase in venture capital investment.
In the first quarter of 2024, investors invested a total of $2.49 billion across 603 projects, as indicated by statistics provided by Galaxy Research. Compared to the previous quarter, this represents a 29% increase in investment and a 68% jump in deal count.
“This was the first rise in both capital invested and deal count in 3 quarters, perhaps signaling that Q4 2023 was the “bottom,” although a continuation of QoQ increases – and a more meaningful increase – would confirm that over the coming quarters.”
Several factors influenced the investment dynamics of this quarter, including the introduction of Bitcoin exchange-traded funds (ETFs), innovations in areas such as restaking, modularity, and Bitcoin layer-2 solutions, as well as macroeconomic factors such as interest rates.
Subsequent quarters of growth must confirm a sustained recovery for the report to be considered successful. Over the past year, the historical link between the price of Bitcoin and venture capital investments in cryptocurrency has become less strong.
Bitcoin’s Price Surge Boosts Venture Capital Activity in 2024
Despite the fact that Bitcoin’s price has increased significantly, venture capital activity has remained relatively unchanged up until the recent rise that occurred at the beginning of 2024, according to the research.
However, the current investment levels do not match the ones attained when Bitcoin’s value exceeded $60,000. During the quarter, early-stage firms received eighty percent of the capital investment.
On the other hand, later-stage startups faced more challenging circumstances. This was due to the fact that a huge number of generalist venture capital firms have either left the industry or significantly reduced their investments, as Galaxy pointed out.
In terms of investment activity, the infrastructure sector was the most active in the industry. During the quarter, this sector raised 24 percent of the total capital, including the $100 million fundraising round that EigenLayer successfully completed.
Furthermore, the Web3 industry contributed 21% of the total capital, whereas the trading sector contributed 17%. American businesses participated in 37.3% of all deals in the cryptocurrency venture market, accounting for 42.9% of the invested capital.
After that, Singapore came in second with 10.8% of the overall number of deals, followed by the United Kingdom with 10.2%, Switzerland with 3.5%, and Hong Kong with 3.2% among the total.
“At the start of 2024, investors widely believed that rates would come down significantly over 2024, but throughout Q1, strong inflation data has tempered expectations for rate cuts this year, which has helped maintain a difficult fundraising environment for venture capitalists.”
Furthermore, Galaxy notes that the industry continues to face challenges in fundraising due to the impact of macroeconomic conditions and regulatory uncertainties.