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(Bloomberg) -- Venture capital investment in the cryptocurrency sector fell significantly in the third quarter before President-elect Donald Trump’s electoral surge revived industry sentiment.

Crypto startups drew in $1.7 billion in the three months ended Sept. 30, a 31.3% decline from the previous quarter, PitchBook data show. The number of deals struck dropped 25.3% to 392.

Crypto markets are currently in a state of euphoria after Trump’s victory in the US election. The President-elect is pro-crypto and has pledged to nurture a hub for the industry on home soil. Bitcoin surged to a record level of near $90,000 on Tuesday with many smaller tokens posting eye-catching gains in a bout of frenzied speculation.

Dealmakers hope a friendlier regime under Trump and surging prices trigger a bout of merger activity in the sector. Whether the political shift also translates to a pickup in venture funding remains to be seen.

As recently as a month ago, the environment appeared much more challenging for digital assets. The total market value of tokens dropped 4.1% in the third quarter, according to PitchBook.

“After rising more than 105% throughout 2023 and then another 58.5% in Q1 2024 — buoyed by record interest in the newly approved spot Bitcoin ETFs in the US — we view the correction as a natural and necessary part of a healthy crypto market,” Robert Le, a senior analyst at PitchBook, wrote in the report.

Le attributed the decline in crypto venture deals to macroeconomic factors including heightened volatility across markets and US recession fears.

Infrastructure projects such as new blockchains continued to be popular with venture investors in Q3, as they were the previous quarter. Blockchain platform Celestia raised $100 million in a funding round led by Bain Capital Crypto, while Story Protocol, another blockchain project, scored $80 million from investors including a16z crypto.

Le said he expects more consolidation among crypto exchanges, custodians and infrastructure firms going forward.