Crypto Funding Report Q1 2024: Venture Capitalists Show Increased Interest Following Bitcoin’s New ATH

In the first quarter of 2024, the crypto market began a notable upward trajectory, approaching a total market capitalization of $3 trillion. By the first quarter, the market experienced a significant surge, surpassing the peak prices of 2021, which rewarded the long-standing patience of investors and holders. The introduction of spot Bitcoin ETF trading and a substantial increase in investment inflows triggered greater institutional adoption. As a result, the cryptocurrency funding ecosystem is witnessing a jump, due to mainstream acceptance globally.

Q1’s Crypto Funding Touched $2.3 Billion

In the first quarter of 2024, venture capital (VC) investments in the cryptocurrency sector experienced a notable uptick, reversing a two-year downward trend. According to on-chain data, the number of projects receiving VC funding have risen since the fourth quarter of 2023. However, data highlights nearly $800 million decrease in investment during this quarter as compared to 2023’s fourth quarter.

The number of projects receiving funding surged by over 40%, reaching levels not seen since the fourth quarter of 2023. This indicates that venture capital funding in the crypto sector is on an upward trajectory.  

The rebound in funding follows a tough 2023 for the cryptocurrency market, which saw a sharp decline in venture capital investments during the “crypto winter.” Throughout this period, startups struggled to secure funding, with average quarterly investments falling by 80% from peak levels seen in 2021 and 2022.

For example, in the first quarter of 2023, cryptocurrency companies raised merely $1.3 billion, a significant drop from the $8 billion recorded in the corresponding period of the previous year. However, in 2024’s first quarter the total invested amount is nearly $2.3 billion, a slight uptick from 2023.

Monthly Breakdown Shows $1 Billion Investment In March

Funding for cryptocurrency firms began surging in January and saw a gradual increase following the SEC’s approval of a spot Bitcoin ETF and a substantial influx into ETFs. By March, investments had exceeded $1 billion. Below is the monthly breakdown of funding in the crypto sector:

It’s noteworthy that, in contrast to previous quarters dominated by banks and non-crypto venture capitalists, this quarter saw increased investment activity from crypto-focused venture firms and OKX Ventures is leading the graph.

Active Investors And Deals

In the first quarter, crypto-native venture capital firms such as OKX Ventures, Animoca Brands, MH Ventures, and DWF Labs led the investment efforts. In March alone, these crypto VC funds deployed more than $1 billion across 168 investment rounds. Venture capital funding in the cryptocurrency sector saw a significant month-on-month increase of 59% in March, with capital primarily directed towards infrastructure and decentralized finance projects.

Trending Categories

This graph below reveals not only the investors with the highest activity but also the sectors each fund deems as high priority. OKX Ventures, Binance Labs and DWF Labs showed a good interest in DeFi investments, whereas Animoca Brands and MH Ventures were more interested in GamFi and Blockchain services.

While blockchain service and DeFi projects attract the bulk of investments from the most active players in the field, a select few spotlight GameFi as a strategic investment target. This move towards GameFi enables rapid adoption and the creation of interactive entertainment ecosystems, a strategy prominently seen with investors like Animoca Brands.

During the first three months of 2024, the fundraising landscape was significantly influenced by DeFi, which claimed a commanding 25% share of total investments. Meanwhile, Blockchain Service’s attention for venture capital has declined, now comprising just 18% of the aggregate funding.

DeFi projects are leading recently following massive interest in the crypto sector. Notably, projects on Ethereum and Solana are dominating.

Monthly Fundraising: DeFi Secures 112 Fundraising Rounds

Closer scrutiny of the category on a monthly basis indicates that DeFi projects maintain a stronger fundraising position. They are leading the chart with 112 fundraising rounds. DeFi projects secured nearly $382 million in funding, while blockchain services secured a total $370 million in funding. 

On the flip side, NFT initiatives display an opposite trend. They rank as the last in the most funded category on a monthly basis and register a lower frequency of funding events. Data reveals that NFT projects secured only 15 fundraising rounds, suggesting a declining trend in market interest.

Moreover, investment rounds within the $3-$10 million bracket reached a count of 100, comprising approximately 37% of the total $2.31 billion invested.

At present, a substantial number of projects are securing small funding. Almost 70% of all investment rounds with a disclosed amount fall within the $1 million to $10 million interval. This trend suggests a cautious approach from investors towards placing large sums into crypto startups, a sentiment reflected in the top 6 most sizable fundraising efforts of the first quarter of 2024. 

US Tops With $785 Million Funding

The United States leads the way in cryptocurrency fundraising, claiming the top position among investment destinations. It gained close to $785 million for crypto ventures, which is about 34% of the global investment total. Hong Kong, meanwhile, follows closely, securing the second position in the crypto funding hierarchy with a total investment sum of $124 million.

In terms of funding origin, the USA holds the top spot for contributions to crypto projects, with 881 initiatives receiving American funds, marking a 57% increase from the preceding period. 

U.S.-based VCs have shown a particular preference for DeFi projects, representing 27% of their total investment portfolio.

Blockchain Gaming: A Drop In Funding

Data collected by DappRadar reveals that the sector received $288 million in funding during Q1, a 57% drop from Q4 2023. Meanwhile, Gunzilla Games successfully raised $30 million for its forthcoming free-to-play battle royale game, Off the Grid. This funding effort, jointly led by CoinFund and Avalanche’s Blizzard Fund, is intended to facilitate the game’s expansion across various gaming platforms, including Sony PlayStation, Microsoft’s Xbox, and PC. 

A decline in funding might slow down these innovations, leading to fewer new titles and updates, which could in turn affect player retention and attraction. Moreover, reduced financial support could lead to less effective marketing and community outreach efforts, limiting the exposure of new games to potential players.