Despite prevailing market sluggishness, venture capitalists maintain a robust interest in the cryptocurrency sector, according to a recent analysis by Galaxy Digital.

During the second quarter of this year, crypto startups amassed a formidable $3.2 billion, representing a 28% uptick from the $2.5 billion raised in the preceding quarter.

Although this figure remains significantly lower than the nearly $10 billion invested in crypto initiatives during the second quarter of 2022, the report suggests that “crypto venture capital sentiment is progressively improving.”

This resurgence in venture capital interest follows a trend observed earlier this year, coinciding with a rise in cryptocurrency prices.

Nonetheless, despite Bitcoin reaching a new zenith in March, crypto venture capitalists have not mirrored the broader market’s enthusiasm, particularly as Silicon Valley is engrossed with AI-related advancements.

Substantial Investment in Web3 Ventures

Within the $3.2 billion funneled into the crypto sector, a notable portion was directed towards web3 projects. Startups focusing on web3, decentralized autonomous organizations (DAOs), the metaverse, and gaming secured 24% of the venture capital, amounting to $758 million.

The most significant funding in this segment was the $150 million procured by Farcaster, a social media protocol.

Layer 1 initiatives and Bitcoin layer 2 solutions also attracted considerable investment, as per Galaxy Digital’s report.

Monad Labs, dedicated to developing a faster Ethereum-compatible version, garnered $225 million, marking the largest funding round of the quarter.

Additionally, Berachain, a layer 1 project, raised $100 million at a valuation of $1.5 billion, Bloomberg reported.

Investor interest in Bitcoin layer 2 solutions, designed to enhance transaction processing efficiency on the Bitcoin blockchain, also saw substantial growth.

Overall, the report highlighted 577 crypto deals in the second quarter, with early-stage investments comprising nearly 80% of the total funding.

Crypto Startup Funding Surpasses $100 Billion Milestone

Over the past decade, crypto startups have experienced a significant funding surge, surpassing the $100 billion milestone since May 2014.

The zenith of cryptocurrency startup funding was reached in October 2021, with over $7 billion raised during that month.

The second-highest funding recorded occurred in February 2022, totaling $3.67 billion.

Recent research indicates that nearly half of all cryptocurrency funding originates from U.S. investors.

The remaining investments are distributed among various nations, with the United Kingdom accounting for 7.7% and Singapore for 5.7%, based on data from the second quarter of 2023.

Noteworthy high-profile funding deals transpired between late 2023 and the first half of 2024.

Together.AI and cross-chain protocol Wormhole each secured investments of $225 million, while open-source cloud storage firm Totter and Eigenlayer raised $101 million and $100 million, respectively.

Other significant funding rounds include Swan Bitcoin’s $165 million raise and Blockchain.com’s $110 million.

These substantial investments underscore the sustained confidence and interest in the cryptocurrency industry.