Venture funding to crypto and blockchain startups surged in the first quarter, more than doubling as the industry reacts to relaxed regulations. Overall, funding for Web3 startups reached $3.8 billion in 220 deals, according to data. This marks a 138% increase from the previous quarter, which saw $1.6 billion raised in 242 deals. It also represents nearly twice the amount raised in Q1 2024.

However, a closer look at the numbers reveals that the large increase is largely due to one major investment. Last month, Binance, a cryptocurrency exchange, secured $2 billion from Abu Dhabi-based investment firm MGX. This round is the largest-ever investment into a crypto company, surpassing the $1 billion raises for FTX and NYDIG in 2021.

Excluding this deal, Web3 startups raised $1.8 billion in Q1, similar to the previous two quarters of 2024 and lower than Q2 2024.

Key Deals in Web3
While deal flow continues to shrink, with fewer deals closed in Q1 than the same time last year, there were still significant investments. Phantom, a crypto wallet startup based in San Francisco, raised $150 million in a round led by Paradigm and Sequoia Capital, bringing its valuation to $3 billion. Additionally, Flowdesk, a Paris-based crypto-financial service company, raised $91.8 million for its trading infrastructure.

Market Challenges
Despite these strong investments, the market still faces challenges. Bitcoin dropped 9% in Q1, and Ether saw a more significant decline of 43%. The new White House administration has sparked optimism, particularly in crypto, with some expecting eased regulations. President Trump’s administration has already taken steps toward establishing a U.S. strategic Bitcoin reserve.

Despite these efforts, Binance’s large investment and its ties to the White House are causing some controversy. Binance, which pleaded guilty to violating anti-money laundering laws in 2023, might soon have connections with the White House. It was reported that President Trump’s family could take a financial stake in the company. Moreover, Trump-linked crypto bank World Liberty Financial is in talks with Binance to launch a dollar-pegged stablecoin.

Looking Ahead for Web3
The Web3 and crypto sectors may be moving forward despite market fluctuations. Some crypto firms are considering entering the IPO market. Circle, a stablecoin issuer, recently filed for an offering, while eToro, a trading platform for stocks and cryptocurrencies, filed for its IPO last month.

Investors will closely monitor these moves as the Web3 sector continues to evolve.