Crypto VC funds facing “massive decline” as allocators provide less capital

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Capital allocators for crypto funds are getting tighter

The crypto venture capital landscape has changed a lot over the years and the market isn’t recovering well from its last bull run.

If you look at the numbers, in 2021, about $33 billion was allocated into the market, David Nage, venture capital PM at Arca, said on Talking Tokens podcast.

(Listen to the episode on Spotify, Apple and YouTube.)

In 2022 that fell to about $30 billion and in 2023 it fell to about $12 billion allocated into the market, Nage said.

“You started to see this massive decline from 2021, 2022, 2023.”

This also corresponded with funds trying to raise new funds, he noted.

So what has happened, for example, if someone raised $100 million for a fund three years ago, they’re probably looking at the “last tranche of capital,” Nage said. This means they’re looking for more allocators to raise a new fund. But if a fund manager is struggling to get more capital, “things become much tighter” in terms of deal flow.

“People have been wondering why, in 2024, the market has been that much slower,” Nage said. “This year, in Q1 we saw about $2.7 billion allocated. Most of that was in March at about $1.6 billion.”

As for Q2 and Q3 they had “roughly around the same” trajectory for allocation, Nage added. “We’ll probably going to see another $10 to $12 billion mark into 2024.”

It’s because the capital injected into the market has been slower than the market has seen in 2021 and 2022. “Aside from that…there’s the regulatory side. This is obviously the 800-pound gorilla on the market right now.”

Check out the next section for more details and the full episode.

The latest Talking Tokens podcast 🎙️

For this week’s Thursday episode, I sat down with David Nage, venture capital PM at Arca and the host of the Base Layer Podcast.

We talk about David’s extensive career in the digital asset world, his VC outlook, how he views the market as a long-term investor, whether or not AI is overhyped, how NFTs can be useful in the future and more. 

Talking Tokens episodes are released on Spotify and Apple Podcasts at 6AM EST or YouTube at 10AM EST every Tuesday and Thursday. Listen in!

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Monitoring blockchains

Looking at some of the biggest developments onchain.

• Solana-focused DeFi exchange Jupiter has released a mobile app

• LatAm Bank Littio Ditches Ethereum for Avalanche as Demand for RWA Vaults Grows (CoinDesk)

• Bitcoin Protocol Babylon has brought in $1.5B of staking deposits during its second round on Tuesday

Taking on the tokens 

The total crypto market cap decreased 1.8% in the past 24-hours to $2.13 trillion. It is up 1% over a 7-day period.

As for the largest cryptocurrencies by market cap…

These metrics were taken prior to publication on Thursday morning EST.

Money and people moves

Latest updates on crypto startups that secured funding and industry players who are starting something new or are on the go.

1. VanEck launches $30 million fund to invest in crypto, AI and FinTech

2. Ria Bhutoria joins permissionless network ‘delta’ as its COO

3. Former Alameda CEO Caroline Ellison agrees to hand over bulk of her assets to settle FTX lawsuit (The Block)

4. Cathie Wood's ARK Invest Buys $2.2M of Coinbase Shares (CoinDesk)

Talking points for the road 

Here’s some headlines and topics that you can talk about at your next dinner party, crypto event or on a first date to look smart (results may vary.) 

1. US charges 18 people, companies with cryptocurrency fraud (Reuters)

2. The $4bn cloud hanging over Bitcoin (DL News)

3. ‘I’m Not Satoshi,’ Says Man Who HBO Suggests Created Bitcoin (Bloomberg)

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Please note that this content is for informational and entertainment purposes only. Any views shared should not be considered financial advice, nor should it be used to make investment decisions. Cryptocurrencies are high risk and you should consult a financial professional before making any financial decisions. Make sure you do your own research. We may have a direct or indirect financial interest in content mentioned in this newsletter.