Crypto VC funding hits $633M in August rebound.

Crypto venture capital funding grew by 15% from July, fueled by increasing investor interest in blockchain infrastructure development. Despite summer liquidity issues in the broader crypto markets, VC funding saw a significant rebound in August. According to DefiLlama data, crypto VC funding rose to $633 million in August, up from $550 million in July. 

As noted by Luca Prosperi, CEO and co-founder of M^0 Labs, a payments protocol for both on- and off-chain solutions, a significant portion of this investment was funneled into blockchain infrastructure development companies. Prosperi expects sustained interest in blockchain infrastructure, saying, "Given the early stage of development, we foresee continued investment across different areas: infrastructure, middleware (which links infrastructure with distributed applications), and the application layer, where innovation is akin to the tech boom of the late '90s and early 2000s." VC funding remains essential for driving blockchain development, and the August increase indicates a shift in focus from AI to crypto. 

One notable example is VC firm Lemniscap, which secured $70 million for a new fund aimed at early-stage Web3 startups, announced on August 28. VC interest shifting back to crypto from AI AI startups dominated VC attention throughout the summer, particularly in June. One of the biggest rounds saw Sentient secure $85 million for an open-source AI platform, with backing from Peter Thiel’s Founders Fund, Pantera Capital, and Framework Ventures. 

However, Prosperi notes that as the AI sector becomes saturated, deep-tech investors are turning their attention back to crypto. “With AI reaching a saturation point, some deep-tech investors are refocusing on crypto, partly due to perceived regulatory advantages, though this view may not be fully grounded,” he said. Investors are also looking for clearer regulations after the U.S. elections in November, which could shape global crypto regulations for the next four years. 

Real-world applications needed to drive VC interest in blockchain’s application layer While blockchain infrastructure is attracting significant VC investment, the sector still lacks a “killer” real-world use case to drive mainstream adoption. More practical applications could draw VC interest toward the application layer of blockchain, according to Covalent CEO and co-founder Ganesh Swami. 

Swami noted, "VCs are currently reluctant to invest in applications, with their focus primarily on infrastructure". A large user base is needed for apps to succeed, and crypto hasn't reached that point yet. It’s still early for apps, though there are promising signs." He also mentioned that the approval of the first U.S. spot Bitcoin and Ether ETFs has helped reignite VC interest in crypto after a strong focus on AI.