Crypto venture capital (VC) activity remains below levels seen in previous bull markets despite the recent rally in digital assets, Galaxy Digital (GLXY) said in a research report on Wednesday.
Total capital allocated to VC funds in 2024 was $11.5 billion, less than in 2023.
Galaxy noted that VC activity was highly correlated with crypto asset prices during the previous bull runs in 2017 and 2021, “but in the last two years activity has remained subdued as cryptos have rallied.”
The stagnation in the venture capital market is due to many reasons.
This includes a “barbell market” in which bitcoin (BTC) and its new spot exchange-traded funds (ETFs) have taken center stage, with “marginal net new activity” from memecoins, Galaxy said. These memecoins are difficult to fund and have “questionable longevity.”
There is growing enthusiasm for new projects at the intersection of artificial intelligence (AI) and crypto, the report says, and upcoming regulatory changes could result in more opportunities in stablecoins, decentralized finance (DeFi) and tokenization.
Some large investors may be gaining exposure to crypto through spot bitcoin ETFs “instead of moving into early-stage VC investment,” the report said.
The US was responsible for the most deals completed in Q4 and the most capital invested, Galaxy said.
Early-stage deals accounted for 60% of total investment in the fourth quarter, and stablecoin companies raised the most money, Galaxy added.
Venture capitalists put $11.5 billion in total into crypto and blockchain-focused startups in 2024. These funds invested $3.5 billion, a 46% quarter-on-quarter increase, across 416 deal in Q4, the report added.
Read more: Crypto VC Market ‘Tepid’ as Q3 Investments Declined 20%, Says Galaxy Digital
