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Despite the summer lull in the cryptocurrency market, venture capital (VC) investments have shown signs of recovery. According to DeFiLlama data, crypto VC funding rose to $633 million in August, marking a 15% increase from the $550 million recorded in July. This indicates that investor confidence is beginning to rise again despite recent market challenges.
VCs Shift Focus to Blockchain Infrastructure
Luca Prosperi, CEO and co-founder of M^0 Labs, observes a significant shift in VCs’ interest towards blockchain infrastructure development firms. Prosperi predicts that this trend will continue and that investments will spread across different layers of the blockchain ecosystem.
Prosperi explains: “Due to being in the early stages of development, we expect continued investment at the infrastructure level, middle layer, and application layer. It’s a period where everything can be redesigned, similar to the late 1990s and early 2000s.”
The growing interest in blockchain infrastructure highlights its vital role in technological advancement. The increase in investments in August suggests a possible shift in VC interest. Cryptocurrencies are regaining attention after a period where the artificial intelligence (AI) sector drew significant focus.
Crypto Regains Attention from AI
VC activities in the crypto space began to decline in June as interest in AI-related ventures increased. During this period, Sentient, an open-source AI platform developer, launched an $85 million funding round led by prominent venture capitalists like Peter Thiel’s Founders Fund, Pantera Capital, and Framework Ventures.
However, the trend seems to be changing. Prosperi observes that some deep-tech investors are returning to crypto as the AI sector approaches saturation, partly supported by the perception of a more favorable regulatory environment. However, he notes that there is no concrete evidence to support this narrative.
While blockchain infrastructure attracts significant VC interest, the technology still lacks a widespread real-world use case that could trigger mass adoption. Ganesh Swami, CEO and co-founder of Covalent, emphasizes the need for more practical applications to draw VC interest to the application layer.
Swami suggests that the approval of Bitcoin 
$99,765 and Ether-based exchange-traded funds (ETFs) could be a significant catalyst for VC interest returning from AI to the blockchain space.
Despite the summer lull in the cryptocurrency market, VC investments showed signs of recovery in August. VCs’ interest in blockchain infrastructure has significantly increased, and there is a shift back from AI to crypto. However, the lack of practical applications hinders the technology’s widespread adoption.
