Cryptocurrency investments see a third consecutive quarterly increase
Crypto Venture Investments: A Rollercoaster Ride
The third quarter of 2025 has witnessed a hike in Cryptoventure investment volume, bucking the trend of a sluggish digital asset sector. However, the number of deals in Q2 2025 took a nose dive, plummeting by 12.5% compared to Q1 2025.
The vibrant investor interest experienced in Q1 2025, as a result of the launch of spot ETFs on bitcoin in the US and new record highs for the largest cryptocurrency, seems to have waned. According to Bloomberg's estimation, the colossal $13.7 billion attracted in January-March decreased to a more modest $2.8 billion in Q2 2025.
As per Rob Hadi, the general partner of the cryptoventure fund Dragonfly, the decrease in deals since the market sentiment shifted from euphoric to more cautious at the end of April is significant.
Despite the reduction in deals, the volume of funds raised for the year is expected to continue its upward trajectory, believes Robert Lee, senior analyst at PitchBook. This growth is predicted to be facilitated by the recovery in cryptocurrency prices and the continued institutional acceptance of digital assets.
Interestingly, the record volume of venture investments in cryptocurrency startups of $10.9 billion was achieved in Q1 2022, marking the culmination of an impressive seven-quarter run. However, this indicator slumped to a 2.5-year low of $1.9 billion in Q3 2023, only to begin recovering from the next quarter onwards.
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Some Noteworthy Trends in Crypto VC
- Post-2023 Recovery: Bitcoin's price began escalating significantly from January 2023, but venture capital activity remained sluggish, reflecting diminished interest from allocators in crypto funds and a preference for Bitcoin-centric narratives over altcoins and DeFi projects.
- Q1 2025 Surge: Funding rebounded to $4.8B (+54% QoQ), largely due to a $2B mega-deal in Binance (accounting for 40% of the total). Eliminating this outlier, funding would have decreased by 20% QoQ.
- Concentration Risk: In growth phases, crypto VC is highly sensitive to individual deals, as seen in Q1 2025's Binance-dominated totals and the tendency of fintech to rely on mega-rounds.
Explaining the Hypothetical Q2 2023 Decline
While specifics for 2023 aren't provided, historical patterns suggest:- Market Narratives: The early 2023 focus on Bitcoin ETFs and regulatory scrutiny could have diverted capital from early-stage crypto startups towards more liquid assets.- Venture Lag: VC activity often lags price rallies by 1-2 quarters, meaning Q1 2023's growth might have reflected late-2022 momentum, with Q2 2023 experiencing a lull as investors awaited clearer signals.
- The sluggish market sentiment towards cryptocurrency in Q2 2025 led to a significant decrease in the number of venture deals compared to Q1 2025.
- Despite the decline in the number of deals, the estimated total funds raised for the year is expected to continue its upward trajectory, driven by the recovery in cryptocurrency prices and the continued institutional acceptance of digital assets.
- According to PitchBook, the surge in funding to $4.8 billion in Q1 2025 was largely due to a $2 billion mega-deal in Binance, with this deal accounting for 40% of the total.
- The post-2023 recovery in cryptocurrency venture capital activity reflected diminished interest from allocators in crypto funds and a preference for Bitcoin-centric narratives over altcoins and DeFi projects.
