Introduction
Crypto VC activity remains depressed compared to prior bull markets. Last quarter was the second smallest since Q4 2020 for venture investment into crypto and blockchain startups. While VC activity dropped by half from the previous quarter, more than 40% of Q1’s $4.8 billion invested came from one sovereign-connected fund (MGX in the United Arab Emirates) investing $2 billion in Binance (the world’s largest crypto exchange, hardly a fledgling startup). The macro environment continues to deter allocators from investing in venture funds, and other vehicles like ETFs and now digital asset treasury companies (DATCOs) are competing with venture for investment.
Still, despite remaining below 2021-2022 bull market levels, venture activity remains active and healthy overall. Sectors such as AI, blockchain infrastructure, and trading continue to draw deals and dollars, and pre-seed activity remains consistent. Given the new administration’s focus on promoting bitcoin, crypto, and blockchain adoption, it’s possible that the United States will further grow its longstanding dominance of the sector.
Key Takeaways
Venture capital investment in crypto startups was $1.97 billion (-59% QoQ) across 378 deals (-15% QoQ) in Q2 2025.
Later-stage deals captured 52% of the capital invested, while earlier-stage deals accounted for the rest.
The mining category led with a $300 million investment in cloud-mining firm XY Miners, followed by $200m+ invested in the privacy/security and infrastructure categories.
The U.S. dominated capital and deal count again, reclaiming the top spot after MGX’s Binance investment pushed Malta to No. 1 last quarter.
On the fundraising side, investors allocated $1.76 billion to 21 new crypto venture funds.
Venture Investing
Deal Count and Capital Invested
In Q2, venture capitalists invested $1.976 billion (-59% QoQ) into crypto and blockchain-focused startups across 378 deals (-15% QoQ).
While the QoQ drop in capital invested appears extreme, an enormous portion of Q1’s $4.8 billion haul came from MGX’s $2 billion investment into Binance. Without that deal in Q1, Q2 would have dropped only 29% QoQ.
Capital Invested and Bitcoin Price
The multi-year correlation between the bitcoin price and capital invested into crypto startups seen during prior cycles has spent the last year struggling to recover. Bitcoin has risen significantly since January 2023 while venture capital activity has struggled to keep pace. Weak allocator interest in crypto venture, and venture broadly, combined with crypto market narratives that favor BTC and have left out many of the hot narratives from 2021, can partially explain the divergence.
Investment by Stage
In Q2 2025, 52% of capital was invested in later-stage companies, while 48% went to earlier stage companies. This is the second time that later-stage investment has exceeded early-stage investment since Q1 2021.
On deal count, the share of pre-seed deals rose slightly and remains healthy relative to prior cycles. We track the percentage of pre-seed deals as a way to gauge the robustness of entrepreneurial behavior. The share of later-stage deals has been rising over the past few quarters, reflecting the growing maturity of the market overall.
Investment by Category
Companies in our mining category raised the largest amount of capital from crypto VCs for the first time in years, pulling in more than $500 million, mostly driven by a $300 million investment in cloud-mining operator XY Miners in a deal led by Sequoia. Increased interest in mining firms stems from the market’s demand for more compute resources as a result of growth in the AI sector.
For the first time since we have tracked this data, mining captured the largest share at more than 20% of all capital invested by crypto VCs in the quarter.
By deal count, the mainstay categories of trading/exchange/investing/lending and Web3/NFT/DAO/metaverse/gaming led the pack, with blockchain Infrastructure and DeFi placing third and fourth.
By deals, the space is becoming more diverse, with the top two categories still maintaining the lead but their shares giving way to a broader set of investable segments over time.
Investment by Stage and Category
Breaking down capital invested and deal count by category and stage gives a clearer picture of what types of companies in each category are raising funds. In Q2 2025, the vast majority of capital invested in mining went to later-stage companies (mostly XY Miners). In contrast, infrastructure and other categories featured raises by younger companies. This is to be expected given the high capital expenditure needs of data center firms alongside the ripe entrepreneurial environment for software startups.
Analyzing the distribution of invested capital across different stages in each category reveals the relative maturity of various investment opportunities.
As in prior quarters, in Q2 the top categories of investment featured deals across a healthy dispersion of stages.
Examining the share of deals done by stage in each category offers insight into the various stages of each investable category.
Investment by Geographic Location
In Q2 2025, 47.8% of capital invested went to companies headquartered in the United States. The United Kingdom was second with 22.9%, followed by Japan with 4.3%, and Singapore with 3.6%.
The story was largely the same by deal count. Companies headquartered in the United States accounted for 41.2% of deals completed, followed by United Kingdom with 7.7%, Singapore with 6.4%, and Switzerland with 3.7%.
Investment by Vintage
Companies founded in 2018 accounted for most of the capital raised, while companies founded in 2024 accounted for the highest number of deals.
Venture Fundraising
While new fund count rose slightly and capital allocated was relatively flat, fundraising for crypto venture funds remains challenging. The macro environment and turmoil in the crypto market from 2022-2023 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. More recently, increased interest in artificial intelligence has also siphoned some attention from crypto investing, while spot ETFs and now treasury companies are also competing for institutional investment. In Q2 2025, the total capital allocated to crypto-focused venture funds was $1.7 billion across 21 funds.
On an annual basis, the first half of the year has 2025 off to a good start, on pace to exceed the amount allocated in 2024.
The average and median fund size have risen slightly in 2025 to $98 million and $57 million, respectively.
Summary
Sentiment is improving and activity is rising, though both are still both well below all-time highs. While bitcoin continues to perform well, most liquid altcoins’ prices remain below their prior highs. Ethereum’s ether (ETH) has begun to rise but still has not retaken its post-election high of $4,100. Prior bull runs in 2017 and 2021 featured a high correlation between VC activity and liquid crypto asset prices, but for the last two years activity has remained subdued while cryptos have risen. The venture stagnation is due to a number of factors, such as waning interest in previously hot crypto VC sectors such as gaming, NFTs, and Web3; competition from AI startups for investment capital; and higher interest rates, which disincentivize venture allocators broadly.
Later-stage deals have led in capital raised in 2025. The last two quarters have seen more capital invested in more seasoned companies than younger ones, reflecting the growing maturity of the space. Pre-seed deal count as a percentage has trended down consistently as the overall industry has matured. With crypto being adopted by established traditional players, and a large cohort of venture-backed firms having found market fit, it’s increasingly likely that the golden era of pre-seed crypto venture investing has passed.
Spot ETPs and digital asset treasury companies (DATCOs) may be pressuring funds and startups. Several high-profile investments in the spot-based bitcoin ETPs in the United States by allocators suggest that some large investors (pensions, endowments, hedge funds, etc.) may be gaining exposure to the sector via the large, liquid vehicles rather than turning to early-stage VC investing. Interest in spot-based Ethereum ETPs has begun to increase. Should that continue, or even if new ETPs launch covering other alternative layer-1 blockchains, demand for exposure to segments like DeFi or Web3 could flow to the ETPs rather than to the venture complex. More recently, the growing ranks of DATCOs may also be competing with venture investment for allocator interest in the sector.
Fund managers still face a difficult environment. While capital allocated ticked up in the first two quarters of 2025, new fund count has declined each of the last two quarters and remains near five-year lows. Macroeconomic factors continue to present headwinds for allocators, but material shifts in the regulatory environment could lead to a resurgence of allocator interest in the space.
The United States continues to dominate the crypto startup ecosystem. Despite a remarkably tricky and often (at least, until recently) hostile regulatory regime, companies and projects headquartered in the United States continued to account for most deals completed and most capital invested. The new presidential administration and Congress have begun enacting the most pro-crypto policies in history across a range of vectors. We expect that U.S. dominance will increase, particularly if certain policy matters, such as implementing regulations for stablecoins and market structure legislation, solidify as expected, which would allow traditional U.S. financial services firms to enter the space in earnest.
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