- Crypto venture capital funding dropped by 20% in Q3 2024, totaling $2.4 billion.
- Bitcoin and memecoins dominated while mid-tier crypto projects saw reduced funding interest.
- U.S. firms led funding, with 56% of capital raised, followed by Singapore and the UK.
Venture capital funding for the cryptocurrency sector fell by 20% during the third quarter of 2024, according to a report from Galaxy Digital. The total funding amounted to $2.4 billion, a decline from the previous quarter, highlighting the challenges faced by mid-tier projects seeking investment. This market, referred to as a “barbell market” by Galaxy’s head of research Alex Thorn and analyst Gabe Parker, was driven by the dominance of Bitcoin and high-risk memecoins, leaving smaller ventures overlooked.
The report further noted that the number of venture deals also decreased by 17%, with 478 transactions recorded. Despite this, the $2.4 billion raised in Q3 still represents a 21.5% increase compared to the same quarter in 2023. The report pointed out that the rising demand for Bitcoin exchange-traded funds (ETFs), particularly from institutional investors, may have diverted attention away from early-stage crypto projects.
Bitcoin Dominates Investor Attention
Large investors like pension funds and hedge funds have shown heightened interest in Bitcoin ETFs, which has left less room for funding other cryptocurrency ventures. According to Galaxy Digital, this focus on Bitcoin and memecoins has led to minimal interest from larger financial institutions in early-stage crypto projects, which has contributed to the overall stagnation of venture capital in the space.
Moreover, early-stage deals accounted for the largest portion of investment, making up 85% of the total capital raised. Crypto exchanges, trading firms, and companies behind blockchain platforms, particularly those working on layer 1 blockchains, were among the top recipients of funding.
AI-Integrated Crypto Projects Gain Traction
Projects integrating artificial intelligence (AI) have seen a substantial rise in funding, with a five-fold increase in capital invested compared to the previous quarter. Companies such as Sentient, CeTi, and Sahara AI were notable beneficiaries, raising $85 million, $60 million, and $43 million respectively.
The United States remained the dominant player in venture capital funding, accounting for 56% of the total investments made, followed by Singapore and the United Kingdom. As interest rates potentially fall and regulatory conditions ease, Galaxy Digital anticipates a possible acceleration in venture capital activity in the last quarter of 2024 and early 2025.
