Originally published on: October 17, 2024
According to a recent report by Galaxy Digital, cryptocurrency venture capital funding saw a decline of 20% in the third quarter, totaling $2.4 billion. This drop was attributed to what the firm referred to as a “barbell market,” where high-risk memecoins and Bitcoin dominated the scene, leaving mid-tier projects struggling to secure funding.
The report, authored by Galaxy Digital’s head of research Alex Thorn and research analyst Gabe Parker, highlighted a 17% decrease in the number of deals made during Q3, with a total of 478 deals executed. Despite the decline, the $2.4 billion in funding marked a 21.5% increase compared to the same period last year.
Thorn and Parker pointed out that the stagnation in venture funding can be attributed to various factors, including the dominance of Bitcoin and the emergence of memecoins, making it challenging for mid-sized projects to attract investment.
The report suggested that the focus of large investors on Bitcoin, particularly with the introduction of Bitcoin ETFs, has led to a lack of interest in early-stage crypto VC investments. This has caused a shift in the correlation between Bitcoin’s price and crypto VC funding.
The report also highlighted the growing interest in artificial intelligence services within the crypto space, with a significant five-fold increase in VC funding for firms integrating AI capabilities. Companies such as Sentient, CeTi, and Sahara AI raised substantial amounts ranging from $43 million to $85 million in the quarter.
In terms of geographical distribution, the United States led the way in VC funding, accounting for 56% of the total funding from 43.5% of the deals. Singapore, the United Kingdom, the United Arab Emirates, and Switzerland followed in the top five.
Galaxy Digital suggested that VC funding in the crypto space may see an uptick in the coming quarters, driven by falling interest rates and a potentially more relaxed regulatory environment.
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