Venture capital funding in cryptocurrencies significantly surged in the month of November, with VC funds investing a total of $1.75 billion into crypto firms.
This figure was more than double October’s total, marking a $1 billion jump, as per a recent report by Messari. A majority chunk of the money went to two relatively unknown Bitcoin mining companies. These were Northern Data and Phoenix Group, which raised $600 million and $370 million, respectively.
Blockchain.com followed these, having collected $110m in a Series E funding round. While Northern Data also does business outside of crypto, Phoenix Group and Blockchain.com predominantly cater to blockchain and cryptocurrency services.
Controversial Layer 2 project, Blast, was also in the top 10 list, owing to its $20m round led by Paradigm. Despite attracting much condemnation from across the Web3 community, its total value locked (TVL) skyrocketed to $500m in its early days. As per DefiLlama, the figure sits now at $621 million.
A host of promising early-stage deals headlined an active December in the crypto fundraising landscape, as per the report. This included Ritual in the AI space, Privy in the wallet space, and Drift in the derivatives space.
Higher crypto prices coming?
November also saw the average deal size going up to $7.5m, which is a 50% spike from last month’s $5m. This was welcomed as a positive sign for the industry, where things have been uncertain with the approaching Bitcoin halving next year and the fears of reduced block subsidies putting a dent in miners’ profitability.
According to Messari researcher Kel, the aggressive financing by these companies suggested an expectation of higher $BTC prices from venture capitalists close to the sector. The report also noted how miners comprised 90% of the deals in the infrastructure sector, whereas exchanges and payments projects accounted for roughly 75% of rounds closed in the financial sector.
The crypto industry also enjoyed a rise in token prices every now and then during that time. In November, Bitcoin knee-jerked higher as inflation declined in October, with the Consumer Price Index (CPI) remaining mostly flat for the month when economists had anticipated a 0.1% rise in the US. The broader crypto market reacted modestly as well.
However, this rally failed to translate into more significant private market flows, noted the analysts at Messari. “Investors are likely in a ramping-up stage, creating more activity that hasn’t yet translated into deals announced”, added Kel.
The situation was much better compared to earlier months like August when fundraising activity fell to multi-year lows. This happened on the back of a stagnated crypto market, with investors worried about the future of crypto regulation.
It was also a time when $BTC dropped by 11.2%, with altcoin prices following the negative trend. Crypto startups raised only $349.3 million, which was a 50.4% drop compared to July. However, the number of funding rounds increased slightly compared to July. Back then, DeFi was the most popular category in terms of funding rounds, followed by Blockchain and Social Services.
