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Nine crypto VCs explain why Q1 investments were so hot and how they relate to past bull markets.

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If the 2023 crypto venture environment was an ice-cold pot of water, Tom Schmidt, a partner at Dragonfly Capital, told shuttech that the first quarter of 2024 is when the bubbles begin to form just before the water boils.

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“And he is correct: $2.52 billion in total capital was raised in the crypto and blockchain industries in Q1 2024, according to PitchBook statistics. That is approximately 25% greater than $2.02 billion in the fourth quarter of 2023.

“It’s been a very hectic period. “It feels like 2021,” said David Nage, Arca’s portfolio manager. “Deals in 2021 felt like you had a gun to the back of your head; that feeling has kind of returned to the market a bit.” Nage stated that his organization has monitored over 690 trades across stages that occurred during the first quarter, which is 30 to 40% more than the lows in 2023.

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“In Q1, the crypto venture capital funding landscape was cautiously optimistic, rebounding from a challenging two-year period of fundraising difficulties for both companies and managers,” said Alex Felix, CoinFund co-founder and chief investment officer.

Despite a large year-over-year decline in both VC and crypto financing in 2023 (about 65%), deal-making activity has increased, Felix noted.

But, Why Now Crypto?

The crypto VC market has heated up in part due to good repercussions from Ripple and Grayscale’s court victories last year, as well as positive attitudes about decentralized finance (DeFi) on Solana. Following the SEC’s approval of bitcoin ETFs in the United States, demand for the largest cryptocurrency has increased.

“Another thing that affected the market is we didn’t die,” Nage went on to say. “I know it’s funny to say this, but after the [collapse of] LUNA, BlockFi, FTX, the banking crisis, the thought was that we would die and we didn’t.”


Where deals are flowing in.

In general, crypto startup deal flow has increased in sectors such as DeFi, SocialFi, and Bitcoin layer-2 growth. “We see 30 to 40 trades every week, up 10% to 20% over the previous quarter. “It’s getting harder to keep up with the pace,” Nage explained.

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