galaxy research's latest report shows a continued cooling in crypto venture capital activity in the third quarter. Bitcoin's BTC/USD Trading within a range below all-time highs.
Venture capital investment stagnates in Q3
According to a report written by Alex ThorneHead of Corporate Research, and Gabe ParkerAccording to research analysts at Galaxy Research, venture capital investment in crypto startups fell to $2.4 billion in the third quarter, a 20% quarter-over-quarter (QoQ) decline. The number of transactions also decreased significantly, dropping 17% from the previous quarter to 478 transactions.
Researchers note that 2024 is on track to match or slightly exceed investment levels in 2023, with $8 billion invested in crypto startups through the first three quarters. Still, this number pales in comparison to the crypto VC boom seen in 2021 and early 2022.
One of the most striking findings is the change in investment stage. “In the third quarter of 2024, 85% of venture capital was invested in early-stage companies and 15% in late-stage companies,” the report states. This is the lowest proportion of late-stage deals since the first quarter of 2020, indicating that more mature crypto companies may struggle to secure funding.
AI-related virtual currency projects continue to attract attention
Despite the overall cooling down, certain sectors of the cryptocurrency space continue to attract significant investment. The report states that “Companies and projects in the 'Trading/Exchange/Investment/Lending' category raised the largest share (18.43%) of crypto VC funding in Q3 2024, with a total VC funding of 462.3 billion yen. “It reached $1 million,” he said. We also saw significant investment in Layer 1 projects and infrastructure companies.
The report also notes that funding for AI-related crypto projects has skyrocketed, increasing five times quarter-over-quarter. This trend is consistent with the broader technology industry's focus on artificial intelligence.
Also read: Anthony Scaramucci says what percentage of his wealth is tied up in Bitcoin: 'I'm not selling anything' Thank God, knock on wood!
Cryptocurrency VC investment hub
Geographically, the United States maintains its dominance in the field of crypto VC. “U.S.-based companies attracted 56% of all venture capital invested, an increase of just 5% quarter over quarter,” the report said. Singapore, the UK, and Hong Kong were the next most active locations for crypto VC investment.
On the funding front, the report paints a difficult picture for crypto-focused venture funds. The researchers note that “cryptocurrency venture fund funding continues to be difficult” and 2024 could be the weakest year for crypto VC funding since 2020. Only 39 new funds raised a total of $1.95 billion through the third quarter, well below this level. Seen in 2021-2022.
This report highlights several important topics, including the continued advantage of early-stage trading, the potential impact of Bitcoin ETFs on venture funding, and the continued regulatory challenges facing the U.S. crypto industry. It concludes by highlighting trends.
An April report showed that the crypto VC landscape is changing significantly as VCs adjust their priorities to new trends like meme coins.
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