In Q1 2024, venture capital (VC) funds raised within the crypto industry surpassed $2 billion. This amount was a 29% increase compared to the previous quarter in 2023.
According to a report from Galaxy Capital, the increase in VC funding can be interpreted as a positive growth sign and confidence in the crypto market.
However, the report also showed investors were more cautious during Q1 2024. One notable factor behind this is the rise in inflation figures in the US.
The report also considered the number of deals made by VC in the same period, noting a remarkable surge in deal count, up by more than 50% quarter-over-quarter (QoQ). Despite an overall increase in deal count, the size of individual deals remained relatively stable.
Over 37.3% of all deals were with companies based in the United States, followed by Singapore at 10.8%. The United Kingdom, Switzerland, and Hong Kong accounted for 10.2%, 3.5%, and 3.2% of deals, respectively.
In Q1, there was also a substantial increase in valuations, nearly doubling compared to previous periods. This reflects investor confidence in the potential success of innovative new ventures within the industry.
Category
A look at the categories of the market that attracted the most funds, the Galaxy report noted that companies building infrastructure attracted the most significant portion of venture capital (VC) funding, accounting for 24% of the total capital raised.
EigenLayer, in particular, stood out by securing $100 million, contributing to this trend. Following closely behind were companies related to “Web3” (21% of capital) and “Trading” (17% of capital).
In other news, Data analyst Crypto Koryo observes a 38% increase in investment capital in Q1 but there is more to this.
Also, Bitcoin Layer 2 projects attracted notable attention from venture investors for several reasons. One significant factor is the introduction of Ordinals on Bitcoin in 2023.
These Ordinals, along with subsequent developments such as the creation of the BRC-20 token standard and the emergence of the Runes token standard, have contributed to shifting perceptions of Bitcoin.
Traditionally seen mainly as a financial network, recent advancements have sparked discussions and initiatives that reimagine Bitcoin as more than just a store of value or a medium of exchange. Instead, these developments position Bitcoin as a platform network with broader capabilities.
The introduction of Ordinals allows for the creation and execution of smart contracts and decentralized applications (dApps) on top of the Bitcoin blockchain.
This expansion enhances the utility and usability of Bitcoin beyond its original purpose as a digital currency.
Galaxy Capital has also observed the emergence of numerous teams working on creating second-layer networks on the Bitcoin blockchain.
These projects make use of scaling technologies like optimistic rollups, zk rollups, re-staking infrastructure, bridging protocols, and more.
