2024 Proved Tough for Crypto Venture Funding, According to Galaxy Digital.

Crypto VC Funding Stagnates Despite Bitcoin’s Bull Run, but Hints of Revival Emerge: Galaxy Digital

Crypto venture capital (VC) investment failed to keep pace with the robust growth in digital asset prices in 2024, Galaxy Digital (GLXY) reported on Wednesday, highlighting a decoupling between market performance and funding enthusiasm.

The report revealed that $11.5 billion was invested into crypto-focused startups last year, a figure that lags significantly behind the inflows seen during previous bull markets in 2017 and 2021. Despite bitcoin’s 120% rally in 2024, VC activity remained subdued, with the market seemingly cautious about re-entering speculative investments.

Factors Behind the Funding Slowdown

Galaxy attributed the muted activity to several trends reshaping the venture capital landscape:

ETF Disruption: The unprecedented success of bitcoin spot exchange-traded funds (ETFs), which attracted billions in inflows, may have diverted capital away from early-stage investments.
Shift to Established Assets: Institutional investors prioritized large-cap cryptocurrencies like bitcoin and ether over speculative tokens or startups.
Emerging Focus Areas: Projects at the intersection of artificial intelligence (AI) and blockchain have started to gain traction, though these remain nascent.
Regulatory Uncertainty: Hesitation around stablecoins and DeFi persists as investors await clearer rules from regulators globally.

Fourth Quarter Offers Hope

While 2024’s overall numbers were lackluster, Q4 brought signs of recovery. Crypto startups raised $3.5 billion across 416 deals, marking a 46% quarter-over-quarter increase. Stablecoin projects led the charge, followed by early-stage investments, which made up 60% of the quarter’s total funding activity.

The U.S. retained its position as the leader in deal activity, reflecting renewed confidence in domestic markets.

What Lies Ahead in 2025?

Galaxy Digital predicts that VC funding could rebound in 2025 as institutional players explore opportunities in tokenization, stablecoins, and AI-integrated blockchain solutions. A supportive regulatory framework and growing investor appetite for innovative projects could further accelerate the sector’s growth.

“Crypto venture capital is navigating a transformative period,” Galaxy analysts noted. “As markets evolve and regulation becomes clearer, we expect new funding avenues to emerge, aligning with the next wave of digital innovation.”