tl;dr
Venture capital funding for crypto startups in the U.S. has not recovered despite regulatory clarity. Excessive fundraising in 2021 and 2022 led to underwhelming returns for investors, reducing VC confidence. Monthly funding for crypto startups dropped from $3 billion in 2021 to $801 million in 2024...
Venture capital funding for crypto startups in the U.S. has been struggling despite regulatory improvements. The excessive capital inflows from 2021 and 2022 did not result in proportional returns for investors, leading to reduced VC money inflow and investor skepticism.
According to MV Global partner Tom Dunleavy, the crypto industry raised excessive capital relative to the number of high-quality projects. He highlighted that venture firms focused on short-term token gains rather than fostering long-term businesses in the emerging sector.
The average monthly VC funding for crypto startups dropped from $3 billion in 2021 to $801 million in 2024, with many funded projects failing and increasing investor caution. While there are signs of recovery, the growth remains subdued despite the improving regulatory environment in the US.
Mickey Hardy, chairman of Arcadia, also noted that many projects funded during the peak fundraising years are no longer operational, leading to increased caution among investors. However, both Dunleavy and Hardy believe that venture capital activity will resume once the market stabilizes, despite the lingering effects of prior losses and a shift in risk appetite.
Overall, the crypto industry's excessive fundraising has weakened VC confidence and led to underwhelming performance, sparking investor skepticism despite regulatory improvements.