Crypto venture capital (VC) activity remains below levels seen in previous bull markets despite the recent surge 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, down from 2023.
Galaxy noted that VC activity was highly correlated to crypto asset prices in previous bull runs in 2017 and 2021, “but in the past two years, activity has remained depressed while cryptos have risen.”
Stagnation in the venture capital market is due to a number of reasons.
These include a “leverage 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 fund and have “questionable longevity.”
There is growing enthusiasm for new projects at the intersection of artificial intelligence (AI) and crypto, the report said, and upcoming regulatory changes could result in more opportunities in stablecoins, decentralized finance (DeFi) and tokenization.
Some large investors may gain exposure to crypto via spot bitcoin ETFs “instead of turning to early stage VC investments,” the report noted.
The U.S. was responsible for the most deals completed in the fourth quarter and the most capital invested, Galaxy said.
Early deals accounted for 60% of total investments in the fourth quarter, and stablecoin companies raised the most money, Galaxy added.
Venture capitalists put a total of $11.5 billion into crypto- and blockchain-focused startups by 2024. These funds invested $3.5 billion, up 46% quarter-on-quarter, across 416 deals in Q4, the report added.
Read more: Crypto VC market ‘lukewarm’ as Q3 investments fall 20%, says Galaxy Digital
