Venture capital investment in the crypto sector
continued to decline in the third quarter of 2024, following a persistent
downtrend that began earlier this year. However, while overall numbers were
down, early-stage startups in areas like AI and blockchain infrastructure
captured the bulk of the remaining interest.
According to a report by Galaxy, the total venture capital investment in crypto
and blockchain-focused startups reached $2.4 billion in Q3 2024, a 20% decline
from the previous quarter. Similarly, the number of deals also fell by 17%,
with 478 deals completed.
Venture Capital Investments
This dip in activity is partly due to the ongoing
sluggishness in the broader crypto market, which has been stuck in a
“barbell” situation, Bitcoin on one end and meme coins on the other,
but little interest from institutional investors.
Despite this decline, 2024 is still on track to match
or slightly exceed 2023’s total VC investments in crypto, signaling that
interest remains, albeit selectively. Early-stage companies attracted 85% of the funding
this quarter, a notable figure that demonstrates investor confidence in the
long-term potential of new projects even as late-stage funding dried up.
The longstanding correlation between Bitcoin’s price
and venture capital activity has notably broken down in 2024. Although Bitcoin
has risen substantially since the start of 2023, venture capital investments
into crypto startups have not followed the same upward trajectory.
The divergence has led to a slower venture capital
market overall, but the data shows that there are still pockets of
growth—particularly in the early stages of crypto development.
US Still Leads
Amid the broader venture capital slowdown, projects
integrating AI technologies have seen a significant surge in funding.
AI-focused crypto startups witnessed a fivefold increase in venture capital in
Q3 2024 compared to the previous quarter.
The US continued to dominate the crypto venture
capital landscape, accounting for 56% of total capital invested and 44% of
deals in Q3 2024. While Singapore, the U.K., and the UAE also showed signs of
activity, their deal volumes and capital investments were significantly lower,
reinforcing the US’s position as the primary hub for crypto innovation and
venture capital.
Interestingly, while US-based companies pulled in
the most capital, companies founded in 2021 captured the largest share of that
investment. Those established in 2022, however, closed the most…
