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After the rise of Bitcoin, Crypto VC is heading for a comeback
(Bloomberg) – Crypto startup deals are back. After a brutal year for cryptocurrency and blockchain-related businesses, venture capital investment in the sector increased by almost a third from the previous quarter, new data shows.
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Venture capital investment in crypto startups reached $2.5 billion during the first quarter of 2024, an increase of 32% from last quarter and roughly on par with the same period of last year, according to PitchBook data. At the same time, crypto startups are raising more capital and venture capital firms are launching new digital asset funds.
“Investors are spending money again,” said PitchBook crypto analyst Robert Le. “Over the last two years, 18 months, they held on to the capital they had raised.”
Le said the renewed enthusiasm for crypto was partly sparked by the approval of Bitcoin exchange-traded funds in January and interest in the intersection of crypto and artificial intelligence. During the slump of 2023 and late 2022, venture capital firms were reluctant to tap funds they raised during the last crypto bull market. This year that started to change.
Anand Iyer, managing partner at venture capital fund Canonical Crypto, said he has seen an uptick in funding activity in recent months. He noted that some founders currently raising money are not newcomers to the industry. “They actually built something in the last cycle that didn’t come to fruition,” Iyer said.
Some early features of crypto that were prominent during the last bull market have also re-emerged. For example, the latest memecoin frenzy echoes past crazes. Websites like Pump.fun have made it possible for anyone with an Internet connection to create useless tokens inspired by animals, pop culture, or virtually any other topic. “They’re funny and all these things, but crypto is very cultural,” Iyer said.
Other venture capital firms are latching on to signs of maturity in the sector.
John Lo, a managing partner who oversees digital asset investing at Recharge Capital, was previously part of the management of decentralized crypto exchange Sushi under the pseudonym “Omakase”, and even used an Anime character filter when trading. a webinar to conceal one’s identity.
Although Lo said some teams still raise capital under a pseudonym, this trend is a nostalgic “remnant” of past crypto culture. Instead, he and his team are excited about the impact of established financial institutions diving deeper into crypto, as evidenced by Bitcoin ETF approvals.
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“We’re seeing usage and adoption of Bitcoin on a scale we’ve never seen before,” he said.
At the same time, improvements are still possible. Recharge focuses on supporting startups that can build better crypto infrastructure and make the sector more attractive to investors. “Crypto is still very early,” Lo said.
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