Key Takeaways
- • US venture investment into crypto companies doubled from its recent low point last fall to reach $1.5B for the three months ending in May, according to PitchBook data cited by Silicon Valley Bank.
- • Crypto's share of US VC deals rose above 6% in Q3 2024, up from 4% at the low point, and US crypto VC investment is up 133% from that low, outpacing most other tech sectors.
- • Paradigm announced a fresh $850M dedicated crypto fund in June, the largest crypto-specific fund in two years, while Andreessen Horowitz led a $100M investment into re-staking platform EigenLayer.
- • New York accounted for 25% of crypto VC deals so far this year, while the West Coast's share fell from 47% of deals in 2021 to 37% in 2024.
- • Emerging managers focused on crypto reached 10% of emerging fund seekers this year, double the 4% share of overall crypto VC deals in 2023, though only $1.1B in new emerging manager funds has closed so far in 2024.
Summary
Venture capital investment in crypto is recovering as the sector regains momentum, according to a Silicon Valley Bank analysis of PitchBook data. US VC investment into crypto companies reached $1.5B for the three months ending in May, having doubled from its low point last fall. Although this remains well below the 2022 peak, the level is higher than pre-boom funding, which SVB says means the current cycle starts from a higher floor than the last. Data runs through September 9, 2024.
Investor confidence has been supported by the performance of spot bitcoin exchange-traded funds approved by the SEC earlier this year. BlackRock's iShares Bitcoin Trust, one of 11 funds directly tracking bitcoin, holds $20B in assets under management. SVB argues that greater regulatory clarity draws more institutions into the asset class. Stablecoin transaction volumes have also grown from near zero to near parity with Visa transactions over six years, though most of that activity is likely automated.
After two years of slower deployment, VC activity in crypto has picked up as the sector regains priority among investors. Some see greater return potential in crypto than in enterprise software and consumer technology, which have delivered more measured returns. Large deals, including a16z's $100M investment into EigenLayer, have helped spur activity and fundraising this year. Paradigm's $850M fund, announced in June, is the largest dedicated crypto fund raised in two years.
SVB cautions that the recovery may be slower than after the 2018 crypto winter, since high interest rates are restraining overall VC deployment and limited partner appetite for new fundraising. Crypto has unique tailwinds, however, including rising liquidity from institutional and retail investors that is driving on-chain capital formation.
Geographically, New York is gaining ground as a crypto hub, accounting for 25% of crypto VC deals this year. The West Coast's share fell from 47% in 2021 to 37% in 2024. The largest crypto deal of the year, a $225M investment, went to New York-based Monad Labs. Blockchain Capital opened an office in Williamsburg, and a16z crypto opened a SoHo office and selected New York for its 2024 Crypto Startup Accelerator. Emerging managers have also maintained crypto focus, with 10% of emerging fund seekers targeting crypto this year, versus 8% in 2023, though only $1.1B in new emerging manager funds has closed so far in 2024, about half the 2021 pace.
Investor confidence has been supported by the performance of spot bitcoin exchange-traded funds approved by the SEC earlier this year. BlackRock's iShares Bitcoin Trust, one of 11 funds directly tracking bitcoin, holds $20B in assets under management. SVB argues that greater regulatory clarity draws more institutions into the asset class. Stablecoin transaction volumes have also grown from near zero to near parity with Visa transactions over six years, though most of that activity is likely automated.
After two years of slower deployment, VC activity in crypto has picked up as the sector regains priority among investors. Some see greater return potential in crypto than in enterprise software and consumer technology, which have delivered more measured returns. Large deals, including a16z's $100M investment into EigenLayer, have helped spur activity and fundraising this year. Paradigm's $850M fund, announced in June, is the largest dedicated crypto fund raised in two years.
SVB cautions that the recovery may be slower than after the 2018 crypto winter, since high interest rates are restraining overall VC deployment and limited partner appetite for new fundraising. Crypto has unique tailwinds, however, including rising liquidity from institutional and retail investors that is driving on-chain capital formation.
Geographically, New York is gaining ground as a crypto hub, accounting for 25% of crypto VC deals this year. The West Coast's share fell from 47% in 2021 to 37% in 2024. The largest crypto deal of the year, a $225M investment, went to New York-based Monad Labs. Blockchain Capital opened an office in Williamsburg, and a16z crypto opened a SoHo office and selected New York for its 2024 Crypto Startup Accelerator. Emerging managers have also maintained crypto focus, with 10% of emerging fund seekers targeting crypto this year, versus 8% in 2023, though only $1.1B in new emerging manager funds has closed so far in 2024, about half the 2021 pace.
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