Crypto VC funding drops to bear market levels in February

Crypto VC funding decreased to levels not seen since the 2023 bear market. Funds flowed through private deals, abandoning the path of mass VC-backed launches. 

February may end with under $500M in VC funding unless a last-minute big deal saves the space. Crypto VC funds had a bumper month in December, expecting to set the pace for the new year. However, funding is shifting, as the VC-backed path for crypto projects has failed to regain its appeal. 

The exact number of funding rounds may be slightly higher at the end of the month. Other estimates count 132 rounds for the past 30 days, with $795M in funding for the period. That sum is down about 30% from its peak. The biggest reported round for the past 14 days belonged to Reservoir, which raised $14M.

Narrative shift is reflected in VC funding reversal

The other reason for the slowdown in VC funding is the weakening of narratives and shifts to new types of projects. Blockchain infrastructure, services, and DeFi were the strongest sectors for new investments. Once again, around 30% of investments were seed rounds, of which most were for $1M- $3M.

In February to date, $435.44M flowed through just 92 deals. A month with under 100 VC deals only happened during the 2023 bear market. As crypto projects shifted to meme tokens, liquidity did not move through VC funds as fast. The 2024 VC funding season surpassed the slow period of 2023. However, the past year’s results resembled the 2018 market more than the peak production of tokens in 2021. 

One of the biggest funds, OKX Ventures, also pointed out that investors are becoming more selective. The path of creating VC-backed tokens, relying on a bull market to lift all assets, then cashing out, has been replaced by other forms of investment. 

VC funding so far has tracked bull markets and altcoin seasons, where demand for new assets was strong. The last quarter of 2024 brought an overall recovery, though the trend reversed in January and February.

IDO and ICO have taken the same downward path in February, with only 182 fundraising rounds. Most new sales were limited to liquidity hubs, where PancakeSwap emerged as a leader. However, the fundraising is for more niche projects, as even the best tech cannot compete with the shorter lifecycle of meme tokens. 

US-based VC funding slows down

The biggest change for VC funding is that US-based funds are no longer the leaders. Despite the ‘Made in USA’ crypto trend, the USA has fallen behind the trend for undisclosed rounds. 

Over $8.1B in new funding was achieved in the USA, but undisclosed deals are now over $10B. For the past month, the USA saw 67 deals, remaining the most active jurisdiction. However, undisclosed rounds still led in raw numbers and funds raised. 

The weak start to 2025 so far challenges the prediction for a growth year. For the whole of 2025, the expectations are for up to $18B in new capital. 

The recent slowdown in VC funding is also an indicator of a market top. December’s price action across all crypto assets coincided with a period of growing deals. After that, as major coins and Bitcoin (BTC) slowed their gains, funding immediately followed. 

Some of the biggest crypto insider funds are posting losses on most of their cumulative investments. For that reason, funds may become more selective. As of February 2025, only Coinbase Venture is close to breaking even. All other funds are posting losses on their cumulative investments, starting from June 2024. The current reversal in new investments reflects months of worsening returns from project tokens. 

The token unlock fatigue and the long slide in altcoin prices put additional pressure on funds. The new trend shifts to products that have already found their audience, which seek forms of financing via airdrops, smaller token sales, or even suggestions of IPO. 

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