Investment in VC-backed crypto companies fell from a record $12.5B in H1 2021 to about $9.3B in H1 2022, while the number of deals increased from 456 to 534
Chris Metinko / Crunchbase News :
Context & Ripple Effects
Two days before this Crunchbase tally, PitchBook's quarterly numbers already showed the turn: crypto startups raised $6.76B in Q2 2022, down 31% from a record $9.85B in Q1. The half-year view adds a twist — dollars fell from $12.5B to about $9.3B even as deal count rose from 456 to 534, meaning checks were getting smaller and spreading across more companies rather than investors leaving outright.
That divergence set up everything that followed: PitchBook logged a 37% YoY drop to $4.44B by Q3 2022, Web3 funding collapsed 81% YoY to $1.7B by Q1 2023 with announced deals falling from 770 to 333, and only in Q4 2023 did investment post its first quarterly rise since Q1 2022.
First-order effects
- With more deals chasing less capital, average round sizes shrank sharply — early-stage startups could still get funded, but the mega-rounds that inflated the 2021 record thinned out first.
- Later-stage crypto companies raised at the peak now faced flat or down rounds, and generalist VCs began reserving follow-on capital for existing portfolios instead of new positions.
Second-order effects
- As the decline deepened through Q3 2022's $4.44B quarter and into the Q1 2023 trough of $1.7B, deal count fell alongside dollars — the survival filter hit funding volume itself, not just check size.
- Exit options dried up with the funding winter; the related coverage shows Q4 2023 producing just 12 crypto exits, the fewest since Q4 2020, which starved limited partners of distributions and reinforced their caution.
Third-order effects
- If the pattern holds, the sector consolidates around fewer, better-capitalized players: the first quarterly rise in Q4 2023 and the 32% QoQ climb to $2.5B in Q1 2024 suggest capital returning selectively to survivors rather than broadly to the category.
- A full cycle — record, contraction, trough, selective recovery — makes crypto VC look like any other cyclical asset class, pushing funds toward staged deployment and away from the momentum-driven check-writing of 2021.
The trend: Crypto venture funding is working through its first full boom-bust-recovery cycle, with capital rotating from breadth (record deal counts) to concentration in fewer, proven teams.