Venture capital funding in the crypto space has shown a significant increase in the first quarter of 2024, breaking a two-year downtrend. Data from Crypto Koryo reveals a 38% rise in funds invested and a 49% increase in the number of projects receiving VC funding compared to the previous quarter. This surge in investments points towards renewed investor confidence in the crypto industry, with notable interest from prominent crypto-native VCs such as Andreessen Horowitz Crypto, OKX Ventures, Multicoin Capital, Paradigm, and Polychain. The trend observed in Q1 2024 is reminiscent of patterns seen in Q4 2020, which preceded a massive influx of VC investments into the crypto sector.
In March alone, crypto VC funds allocated over $1.1 billion across 180 investments, reflecting a 52.5% month-on-month increase in VC funding for crypto projects. The focus has been particularly on infrastructure and decentralized finance. This surge in funding during Q1 2024 comes after positive momentum in Q4 2023, which saw a 2.5% increase in crypto VC investments compared to Q3 2023. The crypto industry faced challenges in 2022, with a decline in venture capital funding coinciding with lackluster market conditions and consecutive quarterly drops in investments.
Balance, a digital asset custodian based in Canada, has revealed that it has reached $2 billion in assets under custody (AUC) amid the recent recovery in crypto markets. Korea Digital Asset (KODA), the largest institutional crypto custody service in South Korea, has also seen a significant growth in crypto assets under its custody. The value of these assets under KODA’s custody expanded by nearly 248% in the second half of 2023, reaching approximately 8 trillion Korean won ($6 billion) by the end of the year. Analysts at Bernstein Research predict that crypto funds could reach $500 billion to $650 billion within the next five years, a significant leap from the current valuation of approximately $50 billion.
Crypto Koryo believes that the positive trend in VC funding in Q1 2024 could signify the beginning of a new wave of investments in the crypto industry. The increased investments and number of projects securing funding indicate a growing interest and confidence among investors. Notably, this quarter has seen a rise in crypto-focused venture firms participating in investments, as opposed to banks and non-crypto VCs that dominated investments in previous periods. The surge in VC funding seen in Q1 2024 mirrors patterns observed in Q4 2020, which was followed by a significant influx of VC investments into the crypto sector.
The upswing in VC funding for crypto projects in Q1 2024 follows the positive momentum witnessed in Q4 2023. Compared to the previous quarter, Q4 2023 experienced a 2.5% increase in crypto VC investments, marking the first rise in VC investments for crypto projects since March 2022. The data shows that the crypto industry is experiencing a revival in investor interest and funding, with a notable increase in both the total amount invested and the number of projects securing funding. This trend is expected to continue, with analysts forecasting substantial growth in crypto funds over the next five years.
