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 venture capital funds in 2024 was $11.5 billion, less than in 2023.
Galaxy noted that venture capital activity was highly correlated with cryptoasset prices in previous bull runs in 2017 and 2021, “but over the past two years activity has remained depressed while cryptocurrencies have recovered.”
The stagnation of the venture capital market is due to several reasons.
These include a “bar market” where 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 finance and have “questionable longevity.”
According to the report, there is growing enthusiasm for new projects at the intersection of artificial intelligence (AI) and cryptocurrencies, and upcoming regulatory changes may lead to more opportunities in stablecoins, decentralized finance (DeFi), and tokenization.
Some large investors may be gaining exposure to cryptocurrencies through spot bitcoin ETFs “rather than turning to early-stage venture capital investments,” the report notes.
The United States was responsible for the most deals completed in the fourth quarter and the most capital invested, Galaxy said.
Early-stage deals accounted for 60% of total investment in the fourth quarter, with stablecoin companies raising the most money, Galaxy added.
Venture capitalists invested $11.5 billion in total in startups focused on cryptocurrencies and blockchain in 2024. These funds invested $3.5 billion, a 46% quarter-on-quarter increase, in 416 deals in the fourth quarter, the report added.
Read More: Crypto VC Market ‘Tepid’ as Q3 Investments Down 20%, Says Galaxy Digital
