Crypto VC Funding Sees Resurgence In August

According to Cointelegraph, crypto venture capitalist (VC) funding experienced a notable resurgence in August, despite the broader crypto market's summer illiquidity. Data from DefiLlama indicates that crypto VC funding rose to $633 million in August, marking a 15% increase from $550 million in July. Most of this renewed VC interest was directed towards blockchain infrastructure development firms. Luca Prosperi, CEO and co-founder of M^0 Labs, a payments protocol, highlighted the ongoing investment at various levels of blockchain development. Prosperi anticipates continued investment in infrastructure, middleware, and application layers, drawing parallels to the tech boom of the late 1990s and early 2000s. The surge in blockchain investment suggests a shift in VC interest back to crypto from the artificial intelligence (AI) sector. This trend is exemplified by VC firm Lemniscap, which secured a $70 million fund targeting early-stage Web3 startups on August 28. Earlier in the summer, AI-related startups had dominated VC attention, with significant investments such as Sentient's $85 million funding round in June. However, Prosperi notes that as the AI sector reaches saturation, deep-tech investors are refocusing on crypto, partly due to a perceived more favorable regulatory environment. Investors are also looking for more regulatory clarity in the crypto space, especially following the upcoming US elections in November, which could influence global regulatory frameworks for the next four years. Despite the growing interest in blockchain infrastructure, the crypto sector still needs more real-world use cases to attract VC investment to the application layer. Ganesh Swami, CEO and co-founder of Covalent, pointed out that while infrastructure investments are currently favored, the sector needs a significant user base to drive app development. Swami also noted that the approval of Bitcoin and Ether-based exchange-traded funds (ETFs) has been a catalyst for the returning VC interest from the AI space.