TL;DR
- Cryptocurrency startups received $2.7 billion in venture capital investments in the second quarter of 2024, a 2.5% increase compared to the first quarter.
- The number of deals closed decreased by 12.5% from the first quarter, showing a notable cooling in investment activity.
- Investments have been primarily focused on infrastructure projects, while consumer-oriented applications have received less attention.
In the second quarter of 2024, cryptocurrency startups saw an increase in venture capital investment. However, there was a decrease in the number of deals closed. Investments in the sector reached $2.7 billion, representing a 2.5% increase compared to the first quarter of the year. However, this figure is still 9.8% lower compared to the same period last year, indicating a slowdown in the sector.
The rise in investments comes amid a challenging context for the crypto market, following the historic highs of several cryptocurrencies earlier in the year, partly driven by the success of Bitcoin ETFs, which launched in January. However, investment flows into ETFs dropped dramatically in the second quarter, with an 80% decline compared to the previous quarter.
The decrease in the number of deals, down by 12.5% from the first quarter, suggests a cooling in investment activity, despite the total value of investments showing a recovery trend. Data indicate that the crypto market is adjusting following the enthusiasm generated by high prices and institutional adoption of digital assets.
The Crypto Market Adjusts
Investment focus has been predominantly on infrastructure projects, such as new blockchains, while consumer-oriented applications have received less attention. This trend has led to increased fatigue among infrastructure investors. The only significant funding round for an application in the last quarter was for the social media platform Farcaster, which raised $150 million in May.
Additionally, there was an increase in exit activities, allowing investors to realize returns by selling their stakes in companies. With 26 exits recorded in the second quarter, including the acquisition of Bitstamp by Robinhood Markets Inc., these activities are expected to continue and could intensify as the market matures.
While the market and the crypto industry show signs of recovery in terms of total investment, the decrease in the number of deals and the shift towards applications instead of infrastructure mark a new phase. We will be watching the evolution of these developments closely.
