Venture Capital in the Crypto Sector Struggled Throughout 2024, Says Galaxy Digital.

Crypto Venture Capital Shows Signs of Revival but Remains Below Peak Levels: Galaxy Digital

Despite a strong rally in digital assets, crypto venture capital (VC) investment in 2024 remained far from the heights seen during previous bull markets, according to a Galaxy Digital (GLXY) research report released Wednesday.

Total VC investment in crypto and blockchain startups stood at $11.5 billion for the year, slightly trailing 2023 levels. Notably, the venture funding trend has decoupled from crypto price movements. In earlier cycles, such as in 2017 and 2021, VC funding closely mirrored asset price surges. However, the past two years have shown muted activity despite robust market performance.

Factors Contributing to Sluggish VC Activity

Galaxy Digital identified several reasons for the subdued VC environment:

• Dominance of Bitcoin and ETFs: With bitcoin (BTC) commanding the spotlight alongside the rise of spot ETFs, investor focus has largely shifted away from riskier early-stage opportunities.
• Memecoin Mania Lacks Depth: While memecoins gained popularity, they offered limited long-term funding prospects, dampening sustained interest from venture capitalists.
• Shifting Focus to AI and Tokenization: The intersection of artificial intelligence (AI) and blockchain is attracting attention, along with anticipated regulatory clarity in areas like stablecoins and decentralized finance (DeFi). However, these opportunities are still maturing.
• Preference for ETFs: Institutional investors increasingly favor spot bitcoin ETFs as a lower-risk entry into the crypto market, bypassing early-stage investments.

Q4 Highlights and Regional Insights

The fourth quarter of 2024 saw signs of a resurgence, with $3.5 billion deployed across 416 deals, marking a 46% increase quarter-over-quarter. The U.S. remained the leader in both deal activity and capital investment. Early-stage funding dominated, accounting for 60% of total investment, with stablecoin-related projects attracting the most capital.

Future Prospects

Galaxy’s report emphasized that while 2024 VC activity was muted compared to earlier bull cycles, the increased focus on foundational technologies like stablecoins, AI integration, and tokenization indicates a potential shift in market dynamics.

“As crypto matures and regulatory clarity improves, we anticipate a broader base of venture funding across emerging sectors,” the report concluded, signaling cautious optimism for 2025.