Galaxy Report: Cryptocurrency sector venture capital reaches 11.5 billion USD in 2024, still below previous bull market levels

According to CoinDesk, Galaxy Digital stated in a research report on Wednesday that despite the recent rise in digital asset prices, cryptocurrency venture capital (VC) activity is still below previous bull market levels. In 2024, VC funds allocated a total of $11.5 billion to the crypto industry, lower than in 2023. Galaxy pointed out that during the first few rounds of bull markets in 2017 and 2021, VC activity was highly correlated with crypto asset prices, "but over the past two years, despite the rise in cryptocurrencies, VC activity has remained sluggish."

There are several reasons for the stagnation of the venture capital market. Galaxy said these include a "barbell market," where Bitcoin and its new spot ETFs took center stage while there was limited "marginal net new activity" for meme coins. These meme coins have difficulty obtaining financial support and their "lifespan is questionable."

The report states that new projects at the intersection of artificial intelligence (AI) and cryptocurrency are receiving increasing attention; upcoming regulatory changes could bring more opportunities for stablecoins, decentralized finance (DeFi), and tokenization. The report notes that some large investors may gain exposure to cryptocurrencies through Bitcoin spot ETFs rather than turning to early-stage VC investments.

Galaxy said that most transactions were completed by US companies in Q4 which also invested most funds into this sector. Galaxy added that early-stage deals accounted for 60% of total investment volume in Q4; stablecoin companies raised most funds.

The report also noted that VCs invested a total of $11.5 billion into startups focusing on cryptocurrency and blockchain technology throughout 2024.These funds invested $3.5 billion across 416 transactions during Q4 alone - an increase of 46% from previous quarters.