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.
The 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 crypto asset prices during previous rallies in 2017 and 2021, “but over the past two years, activity has remained depressed while cryptos have recovered “.
The stagnation of the venture capital market is due to several reasons.
This includes a “dumbbell market” where bitcoin (BTC) and its new spot exchange-traded funds (ETFs) have taken center stage, with “marginal net new activity” coming from memecoins, Galaxy said. These memecoins are difficult to finance and have “questionable longevity”.
There is growing enthusiasm for new projects at the intersection of artificial intelligence (AI) and crypto, the report says, and upcoming regulatory changes could lead to more opportunities in the areas of stablecoins, decentralized finance (DeFi) and tokenization.
Some large investors could gain exposure to cryptocurrencies through spot bitcoin ETFs “rather than turning to early-stage venture capital investing,” the report notes.
The United States accounted for the most deals closed in the fourth quarter and the most capital invested, Galaxy said.
Early-stage deals accounted for 60% of total investment in the fourth quarter, and stablecoin companies raised the most money, Galaxy added.
Venture capitalists invested a total of $11.5 billion in crypto and blockchain-focused startups in 2024. These funds invested $3.5 billion, a 46% quarter-on-quarter increase at the other, in 416 transactions in the fourth quarter, the report added.
Read more: VC cryptocurrency market ‘lukewarm’ as Q3 investments down 20%, says Galaxy Digital
