The first quarter of 2024 marked a turning point in the crypto and blockchain venture capital landscape. After three consecutive quarters of declining deal activity and capital deployment, both metrics saw a rebound—signaling cautious optimism across the ecosystem. While Bitcoin and broader digital asset markets surged, driven by macro catalysts and industry-specific innovations, venture capital investment remained relatively restrained compared to previous bull cycles.
Despite improved sentiment, the reality for startups and fund managers remains nuanced. Higher interest rates, regulatory uncertainty, and lingering fallout from 2022’s market turmoil continue to shape investor behavior. Yet, early-stage innovation is thriving, with significant capital flowing into infrastructure, Bitcoin layer 2s, Web3, and blockchain gaming.
Venture Capital Activity in Q1 2024
Deal Count & Capital Invested
In Q1 2024, venture capitalists deployed $2.49 billion across 603 deals—a 29% increase in capital and a 68% rise in deal count compared to the previous quarter. This marks the first sequential growth in both metrics since Q3 2023, suggesting a potential inflection point in the crypto VC cycle.
While this rebound is encouraging, investment levels remain far below the peaks seen during the 2021 bull market. The data indicates that although more startups are securing funding, average deal sizes have remained flat, pointing to continued capital discipline among investors.
👉 Discover how emerging blockchain projects are attracting early-stage investors in today’s market.
Capital Invested vs. Bitcoin Price
Historically, crypto venture investment has closely followed Bitcoin’s price trajectory. However, in 2023 and early 2024, this correlation weakened significantly.
Bitcoin climbed from under $17,000 in late 2022 to over $70,000 in early 2024, yet VC investment remained subdued until Q1 2024. This divergence can be attributed to several factors:
- Macroeconomic headwinds: Persistent inflation and elevated interest rates have reduced risk appetite among institutional allocators.
- Sector-specific catalysts: Innovations such as Bitcoin ETFs, restaking protocols (e.g., EigenLayer), modular blockchains, and Bitcoin layer 2 solutions have attracted investor interest independent of price momentum.
- Investor caution: After high-profile collapses in 2022 (e.g., FTX, Celsius), many generalist VCs pulled back from the space, limiting late-stage funding availability.
Investment by Stage
Early-stage companies dominated Q1 2024 fundraising activity:
- 80% of capital went to early-stage startups (pre-seed to Series A).
- Only 20% reached later-stage ventures.
This imbalance reflects the ongoing withdrawal of large generalist funds from crypto, making it harder for mature startups to raise substantial rounds. In contrast, crypto-native early-stage funds—many still sitting on unallocated capital from 2021–2022 fundraises—remain active.
Deal count at the pre-seed level also increased slightly, indicating a resurgence in new project formation.
Valuation Trends & Deal Sizes
Despite flat median deal sizes quarter-over-quarter, median pre-money valuations rose nearly 100% in Q1 2024 compared to Q4 2023—the lowest point since 2020.
This suggests founders successfully leveraged improved market sentiment to raise capital with less equity dilution. In contrast, traditional tech startups faced shrinking deal sizes and stagnant valuations during the same period.
The valuation rebound underscores a key trend: while total capital inflows are still limited, founders are regaining pricing power due to renewed optimism around blockchain innovation.
Investment by Category
Top Categories by Capital Raised
- Infrastructure (24%) – Led by EigenLayer’s $100 million raise, this category includes re-staking protocols, developer tooling, rollup frameworks, and blockchain middleware.
- Web3 (21%) – Encompasses decentralized identity, social platforms, content creation tools, and creator economies.
- Trading (17%) – Includes decentralized exchanges (DEXs), derivatives platforms, and on-chain trading infrastructure.
Top Categories by Deal Count
- Web3 (24%) – Driven largely by a surge in blockchain gaming projects.
- Infrastructure (15%)
- Trading (12%)
Blockchain gaming emerged as a major subsector within Web3, with numerous studios launching token-based economies and NFT-integrated gameplay experiences.
👉 See which blockchain sectors are drawing the most venture interest right now.
Geographic Distribution of Funding
Despite regulatory challenges, the United States remains the dominant hub for crypto venture activity:
- 37.3% of deals involved U.S.-based startups.
- U.S. companies captured 42.9% of total capital invested.
Other key jurisdictions include:
- Singapore (10.8% of deals, 11.1% of capital)
- United Kingdom (10.2%, 9.7%)
- Hong Kong (3.2%, 7.9%)
- France (3.5%, 5.6%)
Switzerland and Canada also maintained strong presences in niche infrastructure plays.
Fundraising for Crypto Venture Funds
Raising capital as a crypto-focused fund remains challenging:
- Total capital committed to new crypto VC funds declined QoQ.
- However, the number of newly announced funds increased to at least 22, suggesting a shift toward smaller, more agile fund structures.
- Average fund size dropped to $108 million**, though the median ticked up slightly to **$65 million.
Traditional institutional allocators—pension funds, endowments, family offices—remained cautious, contributing minimally to new fund formations. Most new capital came from existing crypto-native investors or high-net-worth individuals familiar with the space.
Key Takeaways
Sentiment Is Improving—but Not Yet Matching Bull Market Levels
While digital asset prices have rebounded strongly, venture investment has lagged behind historical patterns. The decoupling reflects structural shifts: higher interest rates suppress risk appetite, and post-2022 skepticism lingers among allocators.
However, rising deal counts signal renewed founder confidence and investor engagement—especially at the seed and Series A stages.
Early-Stage Innovation Is Driving Growth
With late-stage funding constrained, innovation is flourishing at the earliest phases. Startups building at the intersection of AI and crypto, modular blockchains, and decentralized gaming economies are capturing attention.
👉 Learn how AI-powered blockchain applications are reshaping startup valuations.
Bitcoin ETFs May Reshape Capital Flows
The approval of spot Bitcoin ETFs in the U.S. provides retail and institutional investors with regulated, low-cost exposure to BTC. While not a direct substitute for startup investing, these products may divert some capital away from private crypto ventures—particularly among allocators seeking simpler exposure.
Additionally, Bitcoin ETFs could pressure publicly traded crypto-linked equities (e.g., Coinbase, MicroStrategy) that previously served as proxy investments.
Bitcoin Layer 2s Are a Major Focus
Venture interest in Bitcoin layer 2 solutions surged in Q1 2024. Innovations like Ordinals, BRC-20 tokens, and the Runes protocol have repositioned Bitcoin as a platform for smart contracts and scalable applications.
Teams leveraging Ethereum-derived scaling technologies—such as optimistic rollups and zk-rollups—are now building second-layer networks on Bitcoin, attracting significant funding.
Infrastructure Plays Are Gaining Momentum
Though Web3 and Trading categories lead in deal volume, Infrastructure became the top recipient of capital in Q1. This includes re-staking protocols like EigenLayer, developer SDKs, cross-chain interoperability tools, and node operation services.
These foundational layers are critical for enabling future scalability and composability across blockchains.
U.S. Dominance Faces Regulatory Risks
The U.S. leads in both deal count and capital raised—but aggressive enforcement actions by regulators threaten its long-term position as a crypto innovation hub.
Policymakers risk pushing entrepreneurs and capital offshore if clearer regulatory frameworks aren’t established soon.
Frequently Asked Questions (FAQ)
Q: Why did crypto VC activity rebound in Q1 2024 despite high interest rates?
A: Improved market sentiment—fueled by Bitcoin ETF approvals, rising BTC prices, and technological breakthroughs like restaking—revived investor confidence. Although high rates limit large fund raises, crypto-native VCs with dry powder continued deploying capital into promising early-stage projects.
Q: Are later-stage crypto startups struggling to raise?
A: Yes. Many large generalist venture firms have reduced or exited their crypto allocations since 2022. As a result, later-stage startups face tighter funding conditions compared to early-stage ventures backed by specialized crypto funds.
Q: What role did EigenLayer play in Q1 infrastructure funding?
A: EigenLayer’s $100 million raise was the largest single infrastructure round in Q1 and helped propel the category to the top spot in capital raised. Its re-staking protocol allows Ethereum validators to secure additional applications, creating new economic models for decentralized security.
Q: Is blockchain gaming really gaining traction with investors?
A: Absolutely. Gaming accounted for a significant portion of Web3 deal activity in Q1. Investors are backing studios that integrate NFTs, token rewards, and player-owned economies—betting on long-term adoption of play-to-earn and move-to-earn models.
Q: How do Bitcoin layer 2 projects differ from Ethereum rollups?
A: While both use rollup technology for scalability, Bitcoin L2s operate under stricter constraints due to Bitcoin’s limited scripting language. Projects often rely on external validation mechanisms or sidechains but aim to inherit Bitcoin’s security through innovative designs like BitVM or merge-mining.
Q: Will more crypto venture funds succeed in raising capital in 2024?
A: It depends on macro conditions and market performance. If Bitcoin sustains its gains and major funds successfully close large rounds, sentiment could improve further—potentially unlocking institutional capital that has remained on the sidelines since 2022.