Crypto firms raise $2.5 billion in Q1, marking a cautious yet hopeful market uptick

According to data shared by Galaxy on May 3, in the first quarter of the year, crypto companies raised nearly $2.5 billion, a 29% increase from the previous quarter. This period also witnessed a 68% surge in deal numbers, totaling 603 deals, indicating the first upward trend in funding and transaction volume over the last three quarters. Galaxy described the investment rise as "modest" in" compa"ison to the crypto market's recovery.

Despite higher cryptocurrency values, venture capital entering the space has not matched the highs of past booms. The firm cited several reasons for this slower pace, including high-interest rates, the collapse of major crypto firms in 2022, and a lack of mature companies ready for large-scale funding. Introducing Bitcoin ETFs is also seen as a factor influencing investment flows.

These ETFs are becoming an appealing alternative for investors, offering a similar but not equivalent opportunity compared to direct startup investments. Investments were primarily concentrated in three sectors. Infrastructure companies led the way, accounting for 24% of the funds, followed by Web3 and trading firms, which secured 21% and 17% of the total investments.

These sectors also dominated the number of deals, indicating their central role in attracting venture capital. In contrast, DeFi companies raised less capital relative to the number of deals they participated in, highlighting a trend towards smaller investments in this area. Investments in Bitcoin’s projects were significant but still represented only 7% of the total capital and 6% of the deals.

Most of the funding was allocated to early-stage firms, drawing 80% of the total investments. These startups, founded between 2021 and 2023, attracted the majority of deals, suggesting strong investor interest in nurturing new entrants to the market.

Galaxy noted that while crypto-focused funds remain engaged in early-stage financing, larger VC firms have either left the space or reduced their stakes, which could pose challenges for later-stage companies seeking significant investments. The quarter saw a renewed interest in crypto investments, albeit cautiously, amidst broader economic pressures and shifting investor strategies. Whether this trend will persist remains to be seen in upcoming quarters.