Crypto Venture Funding Plunges 59% to $1.9B in Q2 as Later-Stage Deals Dominate Market

Crypto's funding winter deepens—venture capital pulls back hard while established players scoop up what's left.

Where'd All the Money Go?

Venture funding got slashed by 59% last quarter, cratering to just $1.9 billion. Early-stage startups got frozen out while later-stage deals hoovered up remaining capital. Investors aren't betting on moonshots anymore—they're backing proven horses in a tightening race.

Survival of the Funded

The smart money's playing defense, doubling down on projects with traction instead of seeding new experiments. It's a brutal shakeout that separates visionaries from vaporware. Even in a downturn, the sector's still moving billions—just with fewer champagne corks popping.

Welcome to crypto's austerity era, where 'building through the bear market' means watching VCs clutch their wallets like traditional finance boomers during a minor correction.

Geographic and stage distribution

US-based companies maintained dominance in the crypto startup ecosystem, receiving 47.8% of capital invested and 41.2% of completed deals. The UK ranked second with 22.9% of capital allocation, followed by Japan at 4.3% and Singapore at 3.6%.

This geographic concentration persists despite historically challenging regulatory conditions in the US.

The shift toward later-stage funding reflects growing market maturity as venture-backed firms achieve product-market fit and established traditional players adopt crypto technologies.

Pre-seed deal percentages have declined consistently as the industry evolves beyond its experimental phase. Companies founded in 2018 accounted for the most capital raised, while 2024-founded companies led deal count metrics.

Market headwinds and competition

Crypto venture fund fundraising remains challenging, with $1.7 billion allocated across 21 funds last quarter.

Macroeconomic factors, including higher interest rates, continue discouraging allocator commitments to venture investments broadly.

Competition from spot Bitcoin exchange-traded funds and digital asset treasury companies provides alternative exposure mechanisms for institutional investors seeking crypto market participation.

Furthermore, the report highlighted that the historical correlation between Bitcoin prices and venture activity has weakened over the past two years.

While bitcoin has risen substantially since January 2023, venture capital deployment has failed to match previous cycle patterns.

Diminished interest in formerly popular sectors, including gaming, NFTs, and Web3 applications, contributes to reduced allocator enthusiasm for crypto venture strategies.

The report projected potential improvements in US crypto startup activity following the new administration’s pro-crypto policy initiatives.

Regulatory clarity around stablecoins and market structure legislation could enable traditional financial services firms to enter the crypto sector, potentially increasing venture funding demand across the ecosystem.