Galaxy Digital (GLXY) says the crypto-venture capital market remains challenging in 2024

Despite the recent rally in digital assets, crypto venture capital (VC) activity remains below levels seen in previous bull markets, Galaxy Digital (GLXY) said in a Wednesday research report.

The total capital allocated to VC funds in 2024 was $11.5 billion, which is less than in 2023.

Galaxy notes that VC activity was closely linked to crypto asset prices during previous bull runs in 2017 and 2021, “but in the past two years, activity has remained depressed while cryptos have risen.”

Stagnation in the venture capital market is due to a number of reasons.

Among them is a “bargaining market” centered on bitcoin (BTC) and its new spot exchange-traded funds (ETFs), with “limited net new activity” from memecoins, Galaxy said. These memecoins are difficult to fund and have “questionable longevity.”

Enthusiasm for new projects at the intersection of artificial intelligence (AI) and crypto is growing, the report says, and upcoming regulatory changes could create more opportunities. stablecoins, centralized finance (DeFi) and tokenization.

Some large investors may gain crypto exposure through spot bitcoin ETFs “rather than turning to early-stage VC investment,” the report said.

According to Galaxy, the US was responsible for the majority of deals and the most capital invested in Q4.

Early-stage deals accounted for 60% of total investment in the fourth quarter, with stablecoin companies raising the most money, Galaxy added.

Venture capitalists have invested a total of $11.5 billion in crypto and blockchain-focused startups in 2024. These funds invested $3.5 billion across 416 deals in Q4, a 46% quarter-on-quarter increase, the report added.

Read more: Crypto VC Market ‘Tepid’ as Q3 Investments Drop 20%, Says Galaxy Digital