Crypto Venture Capital Activity Lags Despite Digital Asset Rally, Report Finds
Despite the ongoing rally in digital assets, crypto venture capital (VC) activity has remained below the levels seen in previous bull markets, according to a report by Galaxy Digital (GLXY) released on Wednesday.
In 2024, the total capital allocated to VC funds reached $11.5 billion, a decrease from 2023. Galaxy noted that while VC activity historically has been closely linked to crypto asset prices during previous bull runs in 2017 and 2021, activity has remained subdued for the past two years, even as the digital asset market has rallied.
The stagnation in VC activity is attributed to several factors. One key reason is the “barbell market,” where Bitcoin (BTC) and its new spot exchange-traded funds (ETFs) have dominated, leaving little room for investment in emerging assets like memecoins, which are difficult to fund and have uncertain long-term viability.
However, the report highlights growing interest in projects at the intersection of artificial intelligence (AI) and crypto, and it suggests that upcoming regulatory changes could open doors to new opportunities in stablecoins, decentralized finance (DeFi), and tokenization.
Additionally, some large investors may be opting to gain exposure to crypto through spot Bitcoin ETFs rather than through early-stage VC investments, the report noted.
The U.S. led the way in both the number of deals and the capital invested in Q4 2024, with early-stage deals making up 60% of the total investment in the quarter. Stablecoin companies were the biggest beneficiaries, raising the most capital.
In total, VC funds invested $11.5 billion in crypto and blockchain startups in 2024. In Q4 alone, these funds put $3.5 billion into 416 deals, marking a 46% increase from the previous quarter.
