Crypto VC funding surges to $4.8B in Q1 as Binance deal drives strongest quarter since 2022

Venture capital (VC) firms invested $4.8 billion in crypto startups in the first quarter of 2025, indicating a resurgence of crypto-related deals. Digital assets firm, Galaxy, reported this in its deal summary, noting that this represents a 40% increase compared to Q4 of 2024. According to the report , it was not just the amount that VCs poured into crypto firms that increased. The number of deals also rose, with 446 deals in the quarter, representing a 7.5% quarter-on-quarter (QoQ) increase. Interestingly, the $2 billion investment of the United Arab Emirates’ MGX into Binance accounted for nearly half of the total investment and was enough to make Q1 the best quarter for crypto and blockchain startup investment since 2022 Q3. Crypto VC investment and deal count (Source: Galaxy) However, things would have been significantly different without the MGX investment in Binance. When that deal is removed, the crypto sector recorded only $2.8 billion in investment, which is 20% lower than the previous quarter. The Binance deal also set the tone for the types of deals investors favored in the quarter. Later-stage investments, such as those in established firms, accounted for 65%, while early-stage deals made up only 35%. This is the first time that later-stage firms have seen a higher percentage of investment since Q1 2021. Still, pre-seed deals fell slightly, and there were more later-stage deals overall, showing that the market is growing even as crypto innovation continues at a healthy pace. Trading/Exchange and DeFi saw the most investment The Binance deal also influenced which subsector saw the most investment, with the trading/exchange/investing/lending category accounting for 47.9% of the funds, totaling $2.55 billion. DeFi followed with $763 million, showing that it remains an area of interest for VCs. According to the report, DeFi has been one of the leading sectors for investment over the last two quarters, along with infrastructure. It has seen more interest from investors than gaming/Web3. The gaming sector has now slipped to fifth place, falling behind infrastructure and payments sectors. However, the gaming sector accounted for 16% of all deals, showing that firms in that sector are getting smaller investments. Trading followed with 62 deals in the quarter, while both infrastructure and AI secured more than 40 deals each. Despite DeFi receiving high capital infusion, it had fewer than 40 deals. Meanwhile, companies in the US attracted the most interest from VC firms, with 38.6% of all deals in the quarter involving a company with its headquarters in the US. The UK followed with 8.6%, while Singapore and the UAE had 6.4% and 4.4%, respectively. Interestingly, the Binance deal meant that the US did not lead in the amount invested, with Malta leading with 36.8%. Still, the US had 24.7% of all the amount invested, while Hong Kong, the UK, and Singapore had 13.4%, 6.6%, and 3.2%, respectively. Crypto investments are still far from peak levels Despite the significant increase in VC crypto investments on both a quarterly and yearly basis, capital infusions into crypto firms remain significantly lower than their peak during the bull run of 2021. There also seems to be a divergence between the rise in Bitcoin value and capital invested in crypto startups. BTC has been reaching new highs, but funds going to crypto funds remain relatively low. Galaxy analysts attribute this to historical events such as the collapse of the crypto market in 2022 and 2023, which continue to discourage some investors from allocating substantial capital to crypto ventures. The growth of AI as an alternative investment is also a factor. The analysts wrote: “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.” Beyond this, the arrival of crypto-focused spot exchange-traded products (ETPs) means that investors who would have allocated capital to a crypto venture fund or startup now have the alternative of gaining exposure to the sector through the ETPs. Nevertheless, analysts believe that regulatory clarity could bring back investors. This may be why the US has been dominating the crypto startup ecosystem, with the new administration already deregulating the sector. The country is expected to solidify its dominance once there are pro-crypto regulations that provide better clarity. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now

Source: Cryptopolitan