The report reveals that overall crypto fundraising saw a modest increase of 2.5%, reaching $2.7 billion across 503 deals in Q1. However, this uptick in dollar volume was counterbalanced by a 12.5% decrease in the number of transactions.

“Investors are channeling capital into a narrower spectrum of ventures,” remarked Robert Le, PitchBook’s senior analyst for emerging technology. “There’s a discernible flight to quality. A few years back, investments were more dispersed across the crypto ecosystem.”

This heightened focus marks a continuation of a trend observed in data over the past year, signaling a strategic pivot towards more promising ventures.

The most significant deals in Q2 were concentrated in layer-1 platforms and emerging technologies. Monad secured $225 million in a Series A round, Berachain garnered $100 million in a Series B round, and the bitcoin restaking platform Babylon attracted $70 million in early-stage funding. Additionally, the decentralized social network Farcaster raised $150 million in its Series A round, while Zentry, a blockchain-based gaming platform, accumulated $140 million in early-stage capital. The bulk of the fundraising was directed towards infrastructure, particularly in scaling solutions and financial services.

Le anticipates that 2024’s overall fundraising will surpass last year’s figures by 20% or more, forecasting a total of $12-$14 billion, compared to approximately $10 billion in the previous year.

As blockchain networks mature, a period of consolidation appears imminent, albeit not in the traditional sense of mergers and acquisitions seen in other industries. With over 150 layer-1 and layer-2 networks currently operational, the long-term viability of many projects is questionable. Le predicts that only a select few—namely Solana, Bitcoin, Optimism, Arbitrum, and Base—will emerge as dominant players, hosting the majority of developer and user activity.

“There are simply too many L1s and L2s,” Le stated. “Solana, Bitcoin, Optimism, Arbitrum, and Base: those are the winners.” He further suggested that many of the lesser projects will devolve into “zombie chains,” characterized by minimal genuine user engagement, overshadowed by bot-driven transactions.

One sector poised to stand out in this cycle is DePIN, or decentralized physical infrastructure. According to the PitchBook analyst, DePIN’s appeal lies in its potential to attract non-native crypto users, a departure from previous cycles that predominantly focused on crypto-native narratives. “DePIN is shaping up to be one of the most compelling narratives, if not the most compelling,” he observed. “Unlike past cycles that catered primarily to crypto insiders, DePIN is seeing significant traction among users outside the traditional crypto sphere.”