Crypto VC Activity Lags Despite Market Rally, but Emerging Sectors Show Promise: Galaxy Digital
Despite bitcoin (BTC) and other digital assets recording significant gains in 2024, crypto venture capital (VC) funding has remained restrained, Galaxy Digital (GLXY) reported on Wednesday. The disconnect highlights a cautious approach by investors despite a bullish market environment.
The total crypto-related VC investment in 2024 reached $11.5 billion, a figure well below the levels seen during the explosive bull markets of 2017 and 2021. Notably, the pace of funding was relatively flat throughout the year, even as bitcoin rallied over 120%.
Key Drivers Behind the Decline
Galaxy identified several factors contributing to the slowdown:
- Shift to ETFs: The overwhelming success of bitcoin spot ETFs diverted institutional capital away from high-risk early-stage projects.
- Focus on Safe Bets: Investors have concentrated on established tokens like BTC and ETH, leaving less attention for speculative ventures.
- Regulatory Overhang: Uncertainty around stablecoins, DeFi, and broader crypto regulations has dampened enthusiasm for new projects.
- AI and Blockchain Intersection: While there’s growing interest in AI-crypto integration, these sectors remain underdeveloped, limiting large-scale investments.
Signs of Resilience in Q4
The fourth quarter showed hints of recovery, with VC funding reaching $3.5 billion across 416 deals, a 46% increase from the previous quarter. Early-stage projects accounted for 60% of this activity, with stablecoin-related companies raising the largest sums.
The U.S. led global funding activity, reaffirming its status as a dominant hub for crypto innovation despite regulatory challenges.
The Path Forward in 2025
Galaxy Digital anticipates that the coming year will see renewed interest in crypto VC funding, particularly in areas like tokenization, AI-powered blockchain tools, and stablecoin infrastructure. The firm suggests that a clearer regulatory framework under the Trump administration could further support growth.
“While 2024 was marked by caution, the underlying trends point to a more dynamic and diverse crypto venture landscape in 2025,” the report said. “The confluence of institutional engagement, regulatory clarity, and emerging technologies could reignite VC activity in the sector.”
