On May 3, Galaxy released data on venture capital (VC) investment, revealing that crypto firms amassed nearly $2.5 billion in funding during the first quarter of the year.

Over the period, crypto companies secured investments across 603 deals, reflecting a substantial 29% surge in dollar value and a notable 68% increase in deal count quarter-over-quarter.

Galaxy emphasized that this growth marks the first uptick in both measures in three quarters, though the sustainability of this trend remains uncertain and will become clearer in future quarters.

Galaxy described the rise in invested capital as "modest," citing various factors that could temper crypto VC investment. It noted that despite the recent recovery in crypto prices from 2023 lows, VC investments have not kept pace, attributing this discrepancy to a combination of factors including a high-interest environment, past failures of crypto companies, and a dearth of later-stage companies capable of absorbing large investments.

Additionally, Galaxy suggested that the emergence of Bitcoin exchange-traded funds (ETFs) could exert pressure on funds and startups alike, serving as an alternative investment avenue while acknowledging that ETFs and direct investments are not entirely interchangeable.

Galaxy's analysis revealed that three primary categories dominated fundraising efforts: infrastructure companies, web3 companies, and trading firms, collectively accounting for the majority of funds raised and deal counts. Notably, DeFi companies demonstrated a disparity, raising a smaller share of capital but accounting for a larger portion of deals.

The report underscored the prominence of early-stage deals in driving investment activity during the quarter, with early-stage firms securing 80% of the total funding. Moreover, startups founded between 2021 and 2023 attracted the lion's share of deals, indicating a strong focus on nascent companies within the crypto space.

Galaxy suggested that while crypto-focused funds maintain robust funding for early-stage ventures, larger generalist VC firms have either withdrawn from the crypto sector or reduced their exposure, potentially posing challenges for fundraising among later-stage crypto startups.