Crypto venture capital investment fell 59% in Q2, with late-stage deals dominating

By Gino Matos, Source: CryptoSlate, Compiled by Shaw Jinse Finance. Venture capital investment in the cryptocurrency sector fell 59% quarter-over-quarter to $1.976 billion across 378 deals in the second quarter of 2025. According to a Galaxy Digital report, the previous quarter was the second-smallest for investment since the fourth quarter of 2020. Late-stage deals accounted for 52% of total invested capital, marking the second time since the first quarter of 2021 that established companies received more funding than startups. This significant quarterly decline appears less severe if the unusual activity in the first quarter (including MGX's $2 billion investment in Binance) is accounted for. Excluding sovereign-related fund transactions, funding in the second quarter decreased by 29% compared to the previous quarter. Galaxy Digital's report shows that despite Bitcoin's strong price performance throughout 2025, venture capital activity in the cryptocurrency sector remains subdued compared to previous bull markets. For the first time in years, mining companies received the largest share of cryptocurrency venture capital, accounting for over 20% of total investment. Sequoia Capital's $300 million investment in cloud mining operator XY Miners drove the $500 million sector allocation primarily, reflecting the increasing demand for computing resources due to the development of the artificial intelligence industry.

Geographic and Stage Distribution

US-based companies maintain their dominance in the cryptocurrency startup ecosystem, securing 47.8% of investment dollars and 41.2% of completed deals. The UK ranked second with 22.9% of capital allocation, Japan ranked third with 4.3%, and Singapore followed closely with 3.6%.

This geographic concentration persists despite historically stringent regulatory conditions in the United States.

This shift toward later-stage investments reflects the market's increasing maturity, with venture-backed companies achieving product-market fit and traditional incumbents embracing crypto technology.

As the crypto industry moves beyond its experimental phase, the proportion of pre-seed funding rounds continues to decline. Companies founded in 2018 received the most funding, while those founded in 2024 led in deal count. Market Headwinds and Competition Fundraising for cryptocurrency venture capital funds remains challenging, with 21 funds securing $1.7 billion last quarter. Macroeconomic factors, including rising interest rates, continue to dampen broad investor investment in venture capital. Competition from spot Bitcoin exchange-traded funds (ETFs) and digital asset finance firms offers alternative exposure to institutional investors seeking to participate in the crypto market. Furthermore, the report highlights that the historical correlation between Bitcoin prices and venture capital activity has weakened over the past two years. Despite Bitcoin's significant gains since January 2023, venture capital investment has failed to replicate the patterns of previous cycles.

Waste of interest in once-hot sectors, including gaming, NFTs, and Web3 applications, has led to a reduction in investor enthusiasm for cryptocurrency venture capital strategies.

The report predicts that activity among U.S. cryptocurrency startups may improve following new government policy initiatives supporting cryptocurrencies.

Regulatory and market structure legislation surrounding stablecoins could lead traditional financial services firms to enter the crypto space, potentially increasing demand for venture capital within the entire ecosystem.