Introduction
Crypto VC remains depressed from prior bull market levels. Despite the quarterly capital invested being the highest since Q3 2022, more than 40% of the capital invested came from one sovereign-connected fund (UAE’s MGX) to Binance ($2bn). Macro concerns continue to weigh on allocator interest in venture capital, and crypto remains a somewhat bifurcated market, with Bitcoin specifically performing well while altcoins and the platforms that underlie previously hot crypto venture segments have struggled comparatively.
Still, overall investment in startups, even Binance aside, remains elevated above 2023 lows. Interest in trading, infrastructure, tokenization, payments, and artificial intelligence categories continues. Given the new administration’s focus on promoting bitcoin, crypto, and blockchain adoption, it’s possible that the United States will further grow its longstanding dominance of the sector.
Key Takeaways
Venture capital investment in crypto startups was $4.9bn (+40% QoQ) across 446 deals (+7% QoQ) in Q1 2025.
Later-stage deals captured the most capital investment (65%), while early-stage deals accounted for 35% of capital invested. Q1 2025 was the first quarter since Q3 2020 that later-stage companies captured a bigger share of capital investment than early-stage companies.
Trading companies raised the most capital, led by Binance’s $2bn raise from MGX, followed by DeFi protocols ($763m) and Infrastructure companies ($506m).
The most capital invested went to startups headquartered in Malta (36.8%), due to Binance’s raise, with the United States and Hong Kong following. On deal count, the U.S. led with 38.6%, followed by the United Kingdom and Singapore.
On the fundraising side, investors allocated $1.9bn to 18 new crypto venture funds.
Venture Investing
Deal Count & Capital Invested
In Q1 2025, venture capitalists invested $4.8bn (+54% QoQ) into crypto and blockchain-focused startups across 446 deals (+7.5% QoQ).
While Q1 2025 was the largest quarter for capital invested since Q3 2022, one massive deal accounted for more than 40% of the capital: MGX invested $2bn into Binance. Without that deal, Q1 2025 would have totaled $2.8bn (-20% QoQ vs. Q4 2024).
Capital Invested & Bitcoin Price
The multi-year correlation between Bitcoin price and capital invested into crypto startups seen during prior cycles has spent the last year struggling to recover. Bitcoin has risen significantly since January 2023, while venture capital activity has struggled to keep pace. Weak allocator interest in crypto venture, and venture broadly, combined with crypto market narratives that favor Bitcoin and have left out many of the hot narratives from 2021, can partially explain the divergence. Though the Q1 2025 rise somewhat re-establishes the correlation, more than 40% of capital invested in Q1 2025 involved a large strategic investment into Binance.
Investments by Stage
In Q1 2025, 65% of capital was invested in later-stage companies, while 35% went to earlier-stage companies, the first time later-stage investment has exceeded early-stage investment since Q1 2021. Without MGX’s $2bn investment in Binance, early-stage would have continued to lead in Q1.
On deal count, the share of pre-seed deals declined slightly but remains healthy relative to prior cycles. We track the percentage of pre-seed deals as a way to gauge the robustness of entrepreneurial behavior. Later-stage deals had a larger share in Q1 2025, reflecting the growing maturity of the market overall.
Investment by Category
Companies in our Trading/Exchange/Investing/Lending category raised the largest amount of crypto VC capital in Q1 2025 at $2.55bn (47.9%), mostly driven by MGX’s $2bn investment into Binance. Were it not for that deal, DeFi would have led the way with $763m.
Over the last two quarters, DeFi and Infrastructure have commanded more share than the gaming Web3/NFT/DAO/Metaverse/Gaming category, which has now slipped to 4th place in capital share.
In terms of deal count, Web3/NFT/DAO/Metaverse/Gaming led the way with 16% of all deals (73). Companies building in the Trading/Exchange/Investing/Lending category followed with 62 deals.
In Q1 2025, Trading, AI, and Payments/Reward deal counts increased, while Web3 continued a multi-quarter slide.
Investment by Stage & Category
Breaking down capital invested and deal count by category and stage gives a clearer picture of what types of companies in each category are raising funds. In Q1 2025, the vast majority of capital in Web3/DAOs/NFTs/Metaverse, Layer 2s, Layer 1s, went to early-stage companies and projects. In contrast, a large share of crypto VC money invested in DeFi, Trading/Exchange/Investing/Lending, and Mining went to later-stage companies. This is to be expected given the relative maturity of the latter categories versus the former.
Analyzing the distribution of invested capital across different stages in each category reveals the relative maturity of various investment opportunities.
Like the crypto VC capital invested in Q4 2024, a substantial portion of the deals completed in Q1 2025 involved early-stage companies.
Examining the share of deals done by stage in each category offers insight into the various stages of each investable category.
Investment by Geographic Location
In Q1 2025, 38.6% of all deals involved a company headquartered in the United States. The United Kingdom followed with 8.6%, Singapore followed with 6.4%, and the United Arab Emirates had 4.4%.
Companies headquartered in Malta led the way with 36.8% of all venture capital invested, entirely comprised of MGX’s $2bn investment in Binance. The United States followed with 24.7%, Hong Kong with 13.4%, the United Kingdom with 6.6%, and Singapore with 3.2%.
Investment by Cohort
Companies founded in 2017 (primarily Binance) accounted for the most capital raised, while companies founded in 2024 accounted for the most number of deals.
Venture Fundraising
While new fund count and capital allocated in Q1 2025 were up YoY, fundraising for crypto venture funds continues to be challenging. The macro environment and turmoil in the crypto market from 2022 to 2023 have continued to dissuade some allocators from making the same level of commitments to crypto venture investors that they did in early 2021 and 2022. More recently, increased interest in artificial intelligence has also commanded some attention previously interested in crypto investing. In Q1 2025, the total capital allocated to crypto-focused venture funds rose to $1.9bn, matching Q2 2024 to tie for the largest since Q3 2023.
On an annualized basis, Q1 2025 set the year off to a good start, currently on pace to exceed the amount allocated in 2024.
New fund count and capital allocated were up YoY vs. Q1 2024, and the average fund in Q1 was also up to $130m, though the median continued to slide. The average was pushed up by large fundraises from Ribbit Capital, Foundation Capital, and the Somnia Ecosystem Fund.
Summary
Sentiment is improving and activity is rising, though both are still both well below all-time highs. While Bitcoin continues to perform well, liquid altcoin prices remain much more depressed. And while capital invested in Q1 2025 into crypto startups is the highest since Q3 2022, almost half of the capital was raised by Binance in a late-stage deal with MGX, an Abu Dhabi fund affiliated with the U.A.E. government. Without that deal, Q1 2025 would’ve come in around $2.6bn, the lowest since Q3 2024 and somewhat near the 4-year lows. Prior bull runs in 2017 and 2021 featured a high correlation between VC activity and liquid crypto asset prices, but for the last two years, activity has remained subdued while cryptos have risen. The venture stagnation is due to a number of factors, such as waning interest in previously hot crypto VC sectors like gaming, NFTs, and Web3, competition from AI startups for investment capital, and the high-interest rate environment, which disincentivizes venture allocators.
Later-stage deals led for the first time since Q3 2020. While the spike in later-stage capital investment was almost entirely due to the large investment by Abu Dhabi-based MGX into Binance, later-stage companies also captured a larger share of the deal count than pre-seed deals. Pre-seed deal count as a percentage has trended down consistently as the overall industry has matured. With crypto being adopted by established traditional players and a large cohort of existing venture-backed firms having found market fit, it’s increasingly likely that the golden era of pre-seed crypto venture investing has passed.
Spot ETPs may be pressuring funds and startups. Several high-profile investments in the spot-based Bitcoin ETPs in the United States by allocators suggest that some large investors (pensions, endowments, hedge funds, etc.) may be gaining exposure to the sector via the large, liquid vehicles rather than turning to early-stage VC investing. Interest in spot-based Ethereum ETPs has begun to increase, and should that continue or even if new ETPs launch covering other alternative layer 1 blockchains, demand for exposure to segments like DeFi or Web3 could flow to the ETPs rather than to the venture complex.
Fund managers still face a difficult environment. While capital allocated ticked up QoQ in Q1 2025, new fund count has declined each of the last 2 quarters and remains near 5-year lows. Macro continues to present headwinds for allocators, but material shifts in the regulatory environment could see a resurgence of allocator interest in the space.
The United States continues to dominate the crypto startup ecosystem. Despite a remarkably tricky and often hostile regulatory regime, companies and projects headquartered in the United States continued to account for most deals completed and most capital invested. The new presidential administration and Congress have begun enacting the most pro-crypto policies in history across a range of vectors, and we expect that U.S. dominance will increase, particularly if certain regulatory matters solidify as expected, such as stablecoin frameworks and market structure legislation, which would allow traditional U.S. financial services firms to enter the space in earnest.
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