Crypto venture capitalist (VC) funding had a resurgence in August despite the summer illiquidity in the wider crypto markets.
Crypto VC funding rose to $633 million in August, up over 15% from $550 million in July, according to DefiLlama data.
Blockchain investments by month. Source: DefiLlama
Most of the VC interest was captured by blockchain infrastructure development firms, according to Luca Prosperi, the CEO and co-founder of on and offchain payments protocol M^0 Labs.
Prosperi expects continued VC interest in blockchain infrastructure. He told Cointelegraph:
“Given the early stage of development, we anticipate continued investment at various levels: the infrastructure level, the middleware level (which connects the infrastructure seamlessly with the distributed application layer), and the application layer itself, where everything can be reimagined as it was during the late 1990s and early 2000s.”
VC capital is crucial for funding the continued development of blockchain technology. The surge of blockchain investment in August signals that VC interest is returning to crypto from the artificial intelligence industry.
Showcasing the growing interest, VC firm Lemniscap secured an investment for a new $70 million fund targeting Web3 startups in early-stage development on Aug. 28.
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Venture capitalist interest is returning from AI to crypto
AI-related startups have captured most of the attention during the summer, particularly in June.
One of June’s largest investment rounds saw Sentient raise $85 million in funding to develop an open-source AI platform. The round was led by Peter Thiel’s Founders Fund, Pantera Capital and Framework Ventures.
However, VC attention is slowly returning to the blockchain space, explained Prosperi:
“With the AI sector now reaching overcrowded peak levels, some of the same so-called deep-tech investors are turning their attention back to crypto, partly driven by a perception of a more favorable regulatory environment (a narrative that, in all fairness, does not seem to be firmly grounded in reality).”
Investors are hoping to gain more regulatory clarity in the crypto space, following the US elections in November, which could set the tone for most global regulatory jurisdictions for the next four years.
Trump vs. Harris: Who Would Be Better for Crypto? Source: YouTube
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Crypto still needs more real-world use cases to attract VC investment to the application layer
While blockchain infrastructure generates significant investor interest, crypto still needs a “killer” use case to bolster mass adoption.
More real-world use cases could attract VC interest to the application layer of blockchain, according to Ganesh Swami, the CEO and co-founder of Covalent.
Swami told Cointelegraph:
“VCs have not warmed up to the idea of investing in apps just yet and all of their interest is in infrastructure investments. For apps to succeed, you need a big user base and crypto hasn't crossed the chasm yet. It's early to invest in apps, though there are some promising signs."
Swami noted that the approval of the first spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) in the US was the catalyst for the returning VC interest from the AI space.
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