Galaxy Digital: investment in crypto by VCs and others rose to $3.2B in Q2 2024, the highest amount in a quarter since Q4 2022, and up from $2.5B in Q1 2024
Plus, updates on former FTX executives and PayPal's stablecoin … Crypto start-ups trying to raise money have found it very difficult over the past few years.
Context & Ripple Effects
The $3.2B second-quarter total extends an early recovery: crypto VC funding had already edged higher in Q4 2023, ending a run of quarterly declines, but exits remained scarce. The new figure is notable because it exceeds the prior quarter despite the article's account of a still-difficult fundraising environment.
Galaxy Digital was also seeking outside capital for an early-stage crypto venture fund, a shift from relying solely on its own balance sheet. That makes the broader funding rebound relevant not only to startups but also to the investors and intermediaries competing to back them.
First-order effects
- Crypto startups seeking capital face a larger aggregate pool of VC and other investor funding than in Q1, although the reported total does not establish that access has improved evenly across companies.
- Galaxy Digital gains a stronger market backdrop for its venture activity and for attracting capital to its early-stage investment effort.
Second-order effects
- A sustained rise in available funding would increase competition among crypto-focused investors for the startups able to raise, while firms that cannot secure backing may face a wider gap versus funded peers.
- More financings can support demand for the custody, wallet, and other financial-service infrastructure used by venture-backed crypto companies; Galaxy has previously expanded into custody through its BitGo acquisition.
Third-order effects
- If quarterly funding continues to recover, crypto venture investing could move from contraction toward a more selective rebuilding phase, with capital increasingly routed through specialist managers and infrastructure providers rather than broadly available to every startup.
- The low level of reported exits in the preceding quarter remains a constraint: a durable recovery depends on investors eventually being able to realize returns, not simply on a single quarter of new commitments.
The trend: Crypto venture capital is showing early signs of reopening after a prolonged funding slump, but the recovery remains contingent on selective deployment and healthier exit markets.