Crypto VC Funding Hits $4.65 Billion in Q3, Second Highest Since FTX

Crypto venture funding came back strong in the third quarter, reaching $4.65 billion, the second highest level since the FTX collapse that sent shockwaves through the industry in late 2022.

The increase marks a 290% jump from the second quarter and reflects the strongest quarter since the first quarter’s $4.8 billion total, according to new data from Galaxy Digital.

Galaxy head of research Alex Thorn said the rebound shows that venture capital appetite for digital asset startups remains stronger than expected, even though overall activity is still below the breakneck pace of the 2021-2022 bull market.

AI and Stablecoins Dominate as Crypto VC Flows Move to Infrastructure

Key areas such as stablecoins, AI-powered crypto tools, blockchain infrastructure and commerce technology continued to attract capital throughout the quarter, while very early stage activity remained stable.

This renewed momentum comes after nearly two years of moderate investment in the sector. Venture capital firms fell sharply after the revelation of FTX’s multibillion-dollar fraud, which shattered trust and froze deal flow in nearly every part of the industry.

Despite this overall increase, capital deployment has been highly concentrated. Out of 414 venture deals, just seven accounted for half of all money invested in the third quarter.

Fundraising in the quarter was highly concentrated, with a handful of major players absorbing most of the capital.

Revolut led with a massive $1 billion funding round, followed by Kraken, which secured $500 million, and Erebor, a US-based crypto bank, which raised $250 million.

Established companies, particularly those founded around 2018, captured the majority of funding. Younger companies launching in 2024, however, accounted for the largest number of deals, suggesting strong early-stage interest even as the market as a whole matures.

Thorn noted that the share of pre-seed has been steadily declining over the past few years.

As more traditional institutions move into crypto and existing venture-backed companies find their place in the market, “the golden age of pre-seed investing in crypto venture capital is likely over,” he said.

Unlike previous bullish phases, the latest market cycle has not been accompanied by a parallel increase in venture financing.

Thorn attributes the stagnation to waning interest in once-hot categories like NFTs, Web3 games and consumer crypto apps, as well as fierce competition from AI startups, which continue to dominate the venture capital landscape.

Rising interest rates are another factor that is largely discouraging venture capitalists.

At the same time, institutional investors appear to be turning to spot Bitcoin ETPs and digital asset treasury strategies, gaining exposure to crypto through liquid, regulated products instead of early-stage bets.

Thorn nevertheless believes that regulatory changes, including clearer American frameworks, could restore dispatchers’ confidence.

The United States maintains its dominance of the business sector

The United States remained the epicenter of crypto VC activity in the third quarter, capturing 47% of capital invested and 40% of deals closed. The United Kingdom followed with 28% of the capital, while Singapore accounted for 3.8%.

Despite previous regulatory uncertainty, Thorn expects US dominance to strengthen under the crypto-friendly Trump administration.

“We expect US dominance to increase, especially now that the GENIUS Act has taken effect and especially if Congress can pass a crypto market structure bill,” he said.

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