Crypto VC market thrives despite recession concerns.

Crypto venture capital investments continued to rise for the second consecutive month in May, despite the overall decline in the economy. According to data from Cointelegraph Research’s Venture Capital Database, funding amounts increased by 34% from April, and the number of individual deals jumped 62%. Although inflation in the United States decreased from 4.9% in April to 4% in May, the U.S. Federal Reserve raised interest rates ten consecutive times. However, the market is still in a waiting phase since decreasing inflation builds trust among investors that inflation is controllable and that Federal Reserve measures will become softer.

On June 14, the Fed announced that it would pause interest rate hikes, which could become a bullish signal for financial markets, including the crypto market. In May, the crypto VC market saw $1.1 billion in investments, the first month to exceed the $1 billion mark since September 2022, according to Cointelegraph Research’s Venture Capital Database. June will be a crucial benchmark for continued growth in VC investment trends.

Breaking down May’s deals, the infrastructure sector leads the market in capital inflows with $783.9 million in 23 rounds, representing over 68% of the total invested money. Web3 is on top in terms of the number of deals with 24 conducted, but only received $170.1 million in funding. Decentralized finance lost ground in May, with 20 deals and $93.6 million raised. Centralized finance was not attractive for VCs, having only two deals at $24.8 million in total.

The top raisers in May included infrastructure solutions developers Worldcoin and Auradine, alongside Web3 project Magic. Worldcoin’s $115 million Series C round saw the participation of Spark Capital, Zoom Ventures, Sound Ventures, Salesforce Ventures, Menlo Ventures, and Google and aimed at promoting World App, its custodial solution, and World ID, its decentralized identity solution. Blockchain privacy and security provider Auradine raised $81 million in a Series A round with the support of Marathon Digital Holdings, Celesta, Mayfield, Cota Capital, and DCVC to promote the “next-generation web infrastructure” with artificial intelligence and zero-knowledge-proof solutions. Web3 development and tooling project Magic received a $52 million Series B deal with PayPal Ventures and Volt Capital as backers, among others. The funds are intended to expand the company’s integration into European and Asia-Pacific markets.

As of June, the Fed’s streak of ten consecutive interest rate hikes has ended. That may turn investment strategies back to risk-on, as short-term adjustments to interest rates significantly impact how capital is invested in both the traditional and decentralized finance spaces. However, VC activity is a lagging indicator and may experience tailwinds in the background of the news. To keep on top of VC activity, follow the Cointelegraph Research VC Database, which is updated weekly and tracks over 6,000 deals from 2012 through the present day.