Web3 Investment Jump 55% in Q1 as VC Confidence Returns to Sector

The total amount spent on Web3 investments went up by 55% in Q1 of the year. The impressive increase shows that venture capital firms and entities are regaining interest in crypto, blockchain, and Web3 in general.

According to the OnChain Report published by blockchain infrastructure firm QuickNode and crypto data service Artemis, Web3 investments rose 55% over figures reported in the fourth quarter of 2023. The report also noted a quarter-on-quarter (QoQ) 36% rise in the number of Web3 investment deals. The two metrics indicate a “strong rebound in VC confidence and investment activity”.

AI Saw More Web3 Investments than Others in Q1

Of all investments, seed round transactions had the highest increases, rising 53% QoQ and indicating investor interest in early-stage firms. The report also noted that Seed and Series A funding rounds nearly doubled the amounts raised between Q4 2023 and Q1 2024.

The OnChain Report highlighted artificial intelligence (AI) as the “clear favorite”. In Q1, the category attracted heavy interest and investment as companies began to explore AI use and its application as a Web3 forerunner. On the other hand, other categories like trading and developer tools only recorded slightly higher investment. This is likely due to reduced investor interest or general disinterest because of uncertainties or the reduced likelihood of quick returns.

“Overall, the first quarter of 2024 not only restored growth trajectories in venture capital funding for Web3 but also highlighted strategic shifts toward sectors that VCs believe will deliver substantial impact and drive the evolution of the blockchain landscape. This period has set a precedent for energetic and strategic engagements in Web3, reinforcing the belief in its significant role in the broader technological ecosystem.”

The QuickNode and Artemis report also contained insights into noteworthy Web3 narratives, as seen in Q1. For instance, the report highlights a stablecoin surge, noting a QoQ increase of 42% in stablecoin user activity. The specified reasons include the upcoming spot Bitcoin ETF, a resurgence in decentralized finance (DeFi), and the introduction of spot Bitcoin exchange-traded funds (ETFs). In general, stablecoins have had the most active addresses for five consecutive quarters. In Q1, stablecoins accounted for more than 41% of all daily active addresses (DAA). This shows that stablecoins are essentially “the backbone of value transfer on the blockchain.”

More on DeFi and Gaming

On DeFi, the report specifies an impressive 291% QoQ increase in user activity despite the continuous SEC crackdown. The quarter ended with DeFi transaction volume surging past record stablecoin transactions, hitting 7 million daily. In addition, all major DeFi platforms, including derivatives, bridges, yield, lending, and liquid staking, doubled or tripled their total value locked (TVL) in the quarter.

Furthermore, the number of active Web3 gaming addresses rose by 155% QoQ, indicating the sector’s ability to attract and maintain its user base. There are also several decentralized social platforms recording increased adoption rates by offering users more data control and a potential share in the platform’s success than is available with traditional alternatives. The OnChain report revealed a 425% QoQ growth in these platforms’ DAA.

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