Crypto Funding Report Q1 2024: Rising Venture Capital Interest
1. INTRODUCTION
The first quarter of 2024 was notably successful for Oxido Solutions. Depending on the risk type, our crypto trading bots achieved returns ranging from 37% (low risk) to 57% (high risk) during this period (View performance report). A key driver of our trend-following trading setup’s performance was a relatively strong upward price trend. This uptick was partly fueled by the introduction of spot Bitcoin ETF trading and a significant increase in investment inflows, leading to greater institutional adoption, including venture capitalists. In this article, we delve into the role of VCs in the crypto market, as they are crucial stakeholders in the cryptocurrency ecosystem.
You’ll learn about:
– What VCs are
– Why they are essential for the crypto market
– The amount of capital they have injected into the market
– Who the active VC investors are and how many deals they have completed
– The categories they invest in
– Which country is leading in crypto fundraising
2. WHAT ARE VCS?
VCs are investors who fund startups and small businesses poised for significant growth. Usually operating within the private equity sphere, these firms or individuals offer capital to emerging companies in return for equity, giving them a stake in the business. This support enables startups to accelerate their development beyond what traditional financing could facilitate. More than just financiers, venture capitalists provide strategic guidance, mentorship, and entry to networks that can connect the startups with potential partners and customers.
3. WHY ARE VCS IMPORTANT FOR THE CRYPTO SPACE?
Many new and emerging companies in the crypto industry need funding to kickstart or expand their operations. Traditional institutions like banks often hesitate to meet these funding needs. As a result, these companies rely on alternative investors, such as VCs. VCs are willing to provide the necessary capital to support these innovators. Their investments drive innovation, speed up the development of blockchain technology, and add credibility to the sector, which in turn draws more investment and interest from other financial entities. Beyond financial support, venture capitalists also offer industry expertise and a network of connections that help crypto startups overcome initial hurdles and grow efficiently.
4. Q1’S CRYPTO FUNDING HITS $2.3 BILLION
The first quarter of 2024 saw a significant rise in VC investments in the cryptocurrency sector, breaking a two-year downward trend. On-chain data indicates that the number of projects securing VC funding has increased since the last quarter of 2023. Despite this uptick, the investment figures still show a nearly $800 million drop from the fourth quarter of 2023.
5. CRYPTO FUNDING REBOUNDS: Q1 2024 SEEKS MAJOR UPTICK
In the first quarter of 2024, the crypto sector witnessed a 40% surge in the number of projects receiving venture capital funding, hitting highs not seen since late 2023. This marks a promising shift towards recovery in venture capital interest in cryptocurrencies.
Following a challenging 2023, which was marked by the “crypto winter,” venture capital investments saw a significant downturn. During this period, startups found it increasingly difficult to attract funding, with average quarterly investments plummeting by 80% from the peak levels of 2021 and 2022.
For context, in the first quarter of 2023, cryptocurrency companies managed to raise just $1.3 billion, a stark contrast to the $8 billion raised during the same period a year earlier. However, the first quarter of 2024 shows a rebound, with nearly $2.3 billion invested, indicating a slight but hopeful increase from the previous year.
6. MONTHLY INVESTMENTS TOP $1 BILLION IN MARCH
Starting in January, funding for cryptocurrency firms began to climb, fueled by the SEC’s approval of a spot Bitcoin ETF and significant inflows into various ETFs. By March, these investments reached over $1 billion. Here’s a breakdown of how monthly funding unfolded in the crypto sector:
This quarter marks a notable shift in investment trends. Unlike previous quarters where banks and non-crypto venture capitalists predominated, we’ve seen a significant uptick in activity from crypto-focused venture firms, with OKX Ventures at the forefront of this movement.
7. ACTIVE INVESTORS AND DEALS
In the first quarter, crypto-native venture capital firms like OKX Ventures, Animoca Brands, MH Ventures, and DWF Labs spearheaded investment efforts. In March, these crypto VC funds invested over $1 billion across 168 investment rounds. The venture capital funding in the cryptocurrency sector experienced a significant month-on-month increase of 59% in March, with funds mainly flowing into infrastructure and decentralized finance projects.
8. TRENDING INVESTMENT CATEGORIES
The graph below not only highlights the most active investors but also illustrates the sectors they prioritize. OKX Ventures, Binance Labs, and DWF Labs have shown a strong interest in decentralized finance (DeFi) investments. Meanwhile, Animoca Brands and MH Ventures have focused more on gaming finance (GamFi) and blockchain services.
9. INVESTMENT TRENDS IN BLOCKCHAIN AND DEFI
While blockchain services and DeFi projects continue to capture the majority of investment from the sector’s most active participants, a notable shift towards GameFi is emerging. This trend highlights GameFi’s potential to foster rapid adoption and develop dynamic entertainment ecosystems, a strategy strongly embraced by investors like Animoca Brands.
In the first quarter of 2024, the investment landscape was heavily influenced by DeFi, which accounted for a substantial 25% of total investments. On the other hand, the focus on blockchain services has seen a decrease, now making up just 18% of all venture capital funding.
DeFi projects have surged to the forefront, driven by heightened interest across the crypto sector. Particularly, projects based on Ethereum and Solana platforms are gaining significant traction.
10. MONTHLY FUNDRAISING: DEFI DOMINATES WITH 112 ROUNDS
A detailed monthly analysis shows that DeFi projects continue to lead in fundraising efforts, securing a dominant position with 112 rounds. These projects garnered nearly $382 million, overshadowing the $370 million raised for blockchain services.
Conversely, NFT initiatives are experiencing a downward trend. They rank lowest in terms of monthly funding volume and frequency, with only 15 fundraising rounds recorded. This indicates a waning interest in the NFT market sector.
Additionally, investment rounds ranging from $3 million to $10 million tallied up to 100, accounting for about 37% of the total $2.31 billion invested.
Currently, a significant portion of projects are attracting smaller investments. Nearly 70% of all investment rounds with a disclosed amount fall between $1 million and $10 million. This trend indicates a cautious stance from investors towards allocating large sums to crypto startups, as evidenced by the top six largest fundraising efforts in the first quarter of 2024.
11. US LEADS WITH $785 MILLION IN CRYPTO FUNDING
The United States is at the forefront of cryptocurrency fundraising, topping the list of investment destinations. It has attracted close to $785 million for crypto ventures, representing about 34% of the total global investments. Hong Kong is also a major player, securing the second spot in the crypto funding hierarchy with total investments amounting to $124 million.
U.S.-based VCs have shown a particular preference for DeFi projects, representing 27% of their total investment portfolio.
12. BLOCKCHAIN GAMING SEES FUNDING DECLINE
According to data from DappRadar, blockchain gaming experienced a significant funding dip, receiving $288 million in the first quarter, which marks a 57% decrease from the fourth quarter of 2023. Despite the overall downturn, Gunzilla Games secured $30 million for its upcoming free-to-play battle royale game, Off the Grid. This funding round, co-led by CoinFund and Avalanche’s Blizzard Fund, aims to expand the game across multiple 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.
13. FUNDING CUTS COULD STIFLE BLOCKCHAIN GAMING GROWTH
A drop in funding could decelerate innovation within the blockchain gaming sector, potentially resulting in fewer new releases and updates. This slowdown may impact player retention and the ability to attract new users. Additionally, diminished financial backing could curtail marketing efforts and community engagement, reducing the visibility of new games to prospective players.
14. OXIDO SOLUTIONS’S PERSPECTIVE ON VC CAPITAL IN THE CRYPTO MARKET
Venture capital in the cryptocurrency market is vibrant, with significant investments flowing into areas like DeFi and blockchain services. The U.S. remains a front-runner, demonstrating widespread global interest in digital assets.
For Oxido Solutions, these evolving investment trends are not just indicators of market confidence; they’re opportunities for our trading bots to excel. As venture capital propels technological progress and market expansion, our trading bots are poised to harness these developments. The support from VC funds allows our bots to leverage market dynamics and innovations, enhancing their performance and capabilities.
Understanding the trajectory of venture capital investments is crucial for us. It provides Oxido Solutions with essential insights, enabling us to fine-tune and advance our trading bots, ensuring they remain at the forefront of a rapidly evolving crypto ecosystem.
Source: Coinpedia
Disclaimer: The opinion expressed in this article is for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
