Venture Capital Drought Hits Crypto Sector

Crypto startups faced their toughest fundraising month since January 2021, with only 62 venture deals completed in May according to RootData analytics. The $909 million raised marked a paradoxical situation — becoming the year's second-highest funding month by value despite hitting a deal volume nadir.

Macroeconomic Headwinds Dampen Enthusiasm

Nansen analyst Aurelie Barthere attributed the slowdown to deteriorating market conditions: "We observed peak sentiment in late January, followed by April's partial recovery before May's tariff rhetoric resurgence." Sentora's Patrick Heusser noted risk assets particularly suffered from volatile bond markets and prolonged high interest rates, with most transactions being consolidation plays rather than new investments.

【Notable Contrast】While overall VC activity withered, Bitcoin emerged as the lone outperformer in an otherwise sluggish crypto asset landscape.

M&A Market Defies the Trend

The sector witnessed record-breaking consolidation activity, highlighted by Coinbase's $2.9 billion acquisition of Deribit. This landmark deal surpassed all previous crypto M&A records according to Blockworks data. Barthere observed increasing preference for direct corporate-protocol deals over traditional VC channels, suggesting regulatory clarity could accelerate this shift.

——"We're seeing capital flow through liquid channels rather than venture rounds," the Nansen analyst emphasized——

Seasonal Factors Offer Q4 Hope

RedStone's Marcin Kazmierczak suggested the downturn might reflect typical May-June seasonality rather than structural weakness: "Historical patterns show deal flow rebounds in early Q4 as investors return from summer breaks." The blockchain executive predicted renewed activity could coincide with Bitcoin's anticipated post-halving market movements.

【Market Paradox】The simultaneous occurrence of record M&A activity and VC drought underscores the crypto sector's evolving investment landscape, where established players consolidate while startups face tougher fundraising conditions.

Regulatory Clarity as Potential Catalyst

Industry observers note that clearer regulatory frameworks could unlock new investment paradigms. The current environment favors mature companies with existing compliance infrastructure, potentially explaining the divergence between booming M&A and struggling venture deals. This bifurcation may persist until macroeconomic conditions improve for early-stage risk-taking.