VC Investment in Crypto Hits $2.4 Billion After Long Decline

Venture capital investment in cryptocurrency companies is reportedly increasing after nearly two years of cooling.

Investment in these companies climbed to $2.4 billion during the first three months of this year, Reuters reported Monday (May 20), citing data from PitchBook.

That report frames this as a tentative signal that venture capital (VC) investors have regained interest in the crypto sector, which took in $11.1 billion from venture firms in the first quarter of 2022, when the market was flying high.

Then came the crypto sector downturn, and seven straight months of declining volumes. PitchBook’s data shows that investors poured just $1.7 billion into crypto companies in the closing quarter of 2023.

“The crypto industry is still in its early stages, and there is a lot of room for growth and innovation,” PitchBook senior analyst Robert Le wrote in a report.

“Barring any major market downturns, we expect the volume and pace of investments to continue increasing throughout the year,” he added.

As Reuters noted, the crypto sector blossomed during 2020 and 2021 due to low interest rates, only to be hit with a series of high-profile bankruptcies in 2022 that scared away investors.

But in the last year, some investors have warmed to crypto once more in the wake of the U.S. Securities and Exchange Commission’s (SEC) approval of bitcoin exchange-traded funds (ETFs) earlier this year. The price of bitcoin topped $73,000 in March, an all-time record.

That isn’t to say the crypto sector is the picture of health. This weekend also brought a report by Seeking Alpha showing that cryptocurrency spot trading cooled in April for the first time in seven months, a trend fueled by a decreasing likelihood of interest rate cuts and slower inflows into U.S.-listed spot bitcoin ETFs.

The report, citing information from CCData, said that spot market volume on exchanges such as Coinbase, Binance and Kraken dropped by 32.6% to $2.01 trillion in April, while monthly derivatives trading volume fell by 24.1% to $4.57 trillion, its first decrease in three months.

Meanwhile crypto custody firm Bakkt said last week that the SEC’s approval of bitcoin ETFs will lead institutional investors to play a larger role in the cryptocurrency trading market.

“As evidenced in our trading volumes in Q1, we’ve begun to see positive green shoots in the market and the overall demand environment improving, with more industry activity, higher coin prices and overall higher retail trading volume,” Andy Main, president and CEO of Bakkt, said during the company’s earnings call.