PriyankaCrypto venture capitalist (VC) funding has seen a notable resurgence in August, despite the usual summer lull and general market illiquidity in the broader cryptocurrency sector.
According to data from DefiLlama, VC funding in the crypto space climbed to an impressive $633 million in August, marking a 15% increase from the $550 million recorded in July. This uptick in investment is largely attributed to heightened interest in blockchain infrastructure development firms. Luca Prosperi, CEO and co-founder of the on-and-off chain payments protocol M^0 Labs, highlighted this trend.
Prosperi anticipates sustained VC interest across various levels of blockchain development. He elaborated to Cointelegraph:
“Given the nascent stage of blockchain technology, we expect ongoing investment across multiple layers: the foundational infrastructure level, the middleware layer—which ensures seamless connectivity between the infrastructure and distributed applications—and the application layer itself. This is reminiscent of the late 1990s and early 2000s, where there was a surge in reimagining possibilities.”
The influx of VC capital is critical for propelling the continued advancement of blockchain technology. The substantial investment witnessed in August signals a shift back towards crypto, pulling away from the recent focus on the artificial intelligence (AI) industry.
Highlighting this renewed interest, VC firm Lemniscap successfully secured $70 million for a new fund dedicated to early-stage Web3 startups on August 28.
During the summer, particularly in June, AI-related startups dominated VC attention. For instance, Sentient raised $85 million to develop an open-source AI platform, with significant backing from Peter Thiel’s Founders Fund, Pantera Capital, and Framework Ventures.
However, Prosperi notes that the crowded AI sector is prompting some deep-tech investors to refocus on blockchain. He explained:
“With AI now reaching saturation, many deep-tech investors are turning their attention back to crypto, partly influenced by a perceived more favorable regulatory environment—a narrative that might not be entirely grounded in reality.”
Investors are also looking forward to clearer regulatory guidelines for crypto following the US elections in November, which could shape global regulatory landscapes for years to come.
While interest in blockchain infrastructure is significant, the crypto sector still seeks a “killer” use case to drive mass adoption and attract VC investment at the application layer. Ganesh Swami, CEO and co-founder of Covalent, pointed out:
“VCs remain cautious about investing in applications at this stage. They focus primarily on infrastructure investments because successful apps require a substantial user base, something crypto hasn’t achieved yet. However, the approval of Bitcoin and Ether-based exchange-traded funds (ETFs) has reignited VC interest transitioning from the AI space.”
Overall, while blockchain infrastructure continues to draw significant investor interest, the sector’s growth will depend on developing real-world applications that can engage a broader user base and drive widespread adoption.
