Author: insights4.vc

Compiled by: Felix, PANews

Driven by the launch of the spot Bitcoin ETF in January 2024 and the election of a US president and Congress supportive of crypto in November, the crypto market experienced significant growth in 2024. The market capitalization of liquid cryptocurrencies soared by $1.6 trillion (up 88% year-over-year), reaching $3.4 trillion by the end of the year, with Bitcoin's market value growing by nearly $1 trillion to nearly $2 trillion by the end of the year. Bitcoin's rise accounted for 62% of the total market gain, while the hype around memecoins and AI tokens also helped drive Bitcoin's rise, as these tokens dominated on-chain activity, especially on Solana.

Despite the market recovery, the crypto venture capital space remains challenging. The limited venture capital opportunities provided by the major trends of Bitcoin, memecoins, and AI agent tokens, as they mainly leverage existing on-chain infrastructure. The once-hot areas of DeFi, gaming, metaverse, and Non-Fungible Tokens (NFTs) have failed to attract significant new attention or capital. Established infrastructure companies face increasingly fierce competition from traditional financial service intermediaries, as regulatory reforms are expected from the new US government.

Emerging trends such as stablecoins, tokenization, DeFi-TradFi integration, and the convergence of crypto and AI show promise but are still in their infancy. Meanwhile, macroeconomic pressures, including high interest rates, have hindered high-risk allocations, disproportionately impacting the crypto venture capital industry. After the much-publicized crypto market crash in 2022, diversified VC firms have largely remained cautious and stayed away from the crypto market.

According to Galaxy Research data, venture investors invested $3.5 billion in crypto and blockchain-focused startups in Q4 2024, up 46% quarter-over-quarter. However, the number of deals declined 13% quarter-over-quarter to 416 transactions.

Annual Crypto Venture Investment (2016-2024)

Throughout 2024, venture capital invested a total of $11.5 billion in cryptocurrency and blockchain startups across 2,153 transactions.

According to PitchBook's "2025 Enterprise Technology Outlook", senior analyst Robert Le predicts that by 2025, annual investment in the crypto market will exceed $18 billion, with multiple quarters exceeding $5 billion. This represents a significant increase from 2024, but is still well below the levels seen in 2021 and 2022.

The increasing institutionalization of Bitcoin, the rise of stablecoins, and potential regulatory progress on DeFi-TradFi integration are all focus areas for future innovation. These factors, combined with emerging trends, can drive a resurgence in venture capital activity.

Capital Investment and Bitcoin Price

Historically, Bitcoin's price has been strongly correlated with the amount of capital invested in crypto startups. However, this correlation has weakened significantly since January 2023. Bitcoin has reached new all-time highs, while venture capital activity has struggled to keep pace with Bitcoin's momentum.

Possible Explanations:

• Waning Allocation Interest: Institutional investors may be hesitant due to regulatory uncertainty and market volatility.
• Shifting Market Narrative: The current market narrative is favorable to Bitcoin, potentially obscuring other crypto investment opportunities.
• Venture Capital Headwinds: A broader downturn in the venture capital market may be impacting crypto investments.

Infrastructure Dominates Crypto Venture Investment

Total Funding by Sector in 2024 (USD)

According to The Block data, in 2024, infrastructure dominated crypto venture investment, attracting over 610 deals worth $5.5 billion, up 57% year-over-year. The focus was on scaling blockchain networks through L2 solutions to improve speed, reduce costs, and enhance scalability. Modular technologies, including data availability and shared sequencers, received significant funding, while liquid staking protocols and developer tools remained key priorities.

Non-Fungible Token (NFT) and gaming startups raised $2.5 billion, slightly higher than the $2.2 billion in 2023. While funding remained stable, NFT market activity declined as memecoins gained traction. Although transaction activity has matured from the 936 deals peak in 2022, NFTs and gaming remain a focus, with over 610 deals. Enterprise blockchain financing declined significantly, down 69% year-over-year, from $536 million in 2023 to $164 million.

Web3 financing showed some resilience, raising $3.3 billion, close to the $3.4 billion raised in 2021-2022. The growth was driven by emerging trends such as SocialFi, crypto AI, and DePIN. DePIN has become a rapidly growing vertical, attracting over 260 deals and nearly $1 billion in funding.

DeFi experienced a strong recovery in 2024, with over 530 deals (up 85% year-over-year) compared to 287 in 2023. Bitcoin-based DeFi use cases, including stablecoins, lending protocols, and perpetual protocols, were key drivers of this growth.

Crypto Venture Capital Investment by Stage

The chart shows that, excluding undisclosed rounds, the crypto industry remains highly concentrated in the early-stage funding rounds. Early-stage deals attracted the majority of capital investment, accounting for 60%, while later-stage financing represented 40% of the total capital, a significant increase from 15% in the third quarter.

Most Active Investors

In 2024, Animoca Brands led venture investment activity with over 100 deals, followed by OKX Ventures with over 80 deals. Cogigent Ventures, Binance Labs, and Foresight Ventures each completed around 60 deals, while The Spartan Group, Big Brain Holdings, and Robot Ventures completed over 50 deals. Polychain Capital and Amber Group maintained over 40 deals each.

Venture Capital Funds

Among angel investors, the most active was Sandeep Nailwal (Polygon founder) with over 40 deals, followed by Paul Taylor and DCF God with over 30 deals each. Anatoly Yakovenko (Solana founder), Santiago R. Santos, and Balaji Srinivasan were also significant participants, completing over 25 deals each, while Mert Mumtaz was slightly less active but still very involved.

Angel Investors

Crypto Venture Fundraising

According to Venture Capital Journal data, venture capital fund fundraising in 2024 fell to its lowest level in six years, with 865 funds raising a total of $104.7 billion, a significant 18% decline from the $128 billion raised by 1,029 funds in 2023.

Affected by macroeconomic conditions and the persistent market volatility in 2022-2023, crypto venture capital still faces pressure. Allocators have reduced their commitments to crypto venture capital funds, reflecting a shift from the bullish sentiment in 2021 and early 2022. While rate cuts are expected in 2024, meaningful rate cuts will not occur until the second half of the year, and venture capital's capital allocation has continued to decline quarter-over-quarter since Q3 2023.

Crypto venture capital situation from 2017 to 2024

The fundraising situation for crypto venture capital funds in 2024 was clearly weak, with 79 new funds raising $5.1 billion, the lowest annual total since 2020. Although the number of new funds increased slightly year-over-year, the decrease in allocator interest led to a significant reduction in fund size. The median and average fund sizes in 2024 reached their lowest levels since 2017, highlighting the increasingly challenging financing environment.

Shift to mid-sized funds

Historically, small funds (less than $100 million) have dominated crypto venture capital fundraising, reflecting the industry's early stage. However, the trend has shifted notably towards mid-sized funds ($100 million to $500 million) since 2018.

While large funds ($1 billion or more) experienced rapid growth from 2019 to 2022, they did not emerge in 2023 and 2024 due to the following challenges:

• Deployment difficulties: a limited number of startups require large amounts of capital
• Valuation risk: large investments have driven up valuations, increasing risk

Nevertheless, prominent funds such as Pantera Capital and Standard Crypto ($500 million) remain active, expanding their scope beyond cryptocurrencies to areas like AI. Notably, Pantera Fund V, the successor to Pantera Blockchain Fund IV, is set to have its first close in July 2025, targeting $1 billion.

The table below summarizes the 10 funds that raised over $100 million in 2024. The largest closed-end fund in 2024 was Paradigm's Fund III.

Crypto venture capital funds that raised over $100 million in 2024

Notable investments in 2024

Top 10 venture capital projects in 2024

• Monad: An EVM-compatible L1 blockchain that achieves 10,000 TPS throughput, 1-second block times, and single-slot finality. Its parallel transaction execution architecture ensures efficiency, making it a top choice for developers seeking speed and scalability.
• Farcaster: A social network that empowers users to control their data. Its "fully decentralized" design allows interactions without network-wide approval, using an Ethereum-protected, non-custodial social graph. The flagship Warpcast app showcases its potential to redefine social media.
• Berachain's Proof-of-Liquidity (PoL) consensus ties network security to liquidity supply, allowing validators to stake liquid assets to enhance security while earning rewards. EVM compatibility simplifies DeFi application deployment, solidifying Berachain's role in the DeFi ecosystem.

• Story Protocol: Transforms intellectual property management through on-chain registration, automatic licensing, and monetization via token-bound accounts supported by ERC-6551. Leveraging the Ethereum Virtual Machine and Cosmos SDK, it empowers creators and fosters innovation.
• 0G Labs: Combines blockchain scalability with AI-driven processes, featuring a robust data availability layer and a decentralized AI operating system (dAIOS). Its $250 million raise leads 2024's project financing, surpassing Monad and cementing its dominance in the AI-blockchain space.
• Polymarket: A decentralized prediction market that gained significant attention during the 2024 U.S. presidential election, showcasing the potential for rapid Web3 adoption, despite a subsequent decline in post-event metrics.

Blockchain Infrastructure

• EigenLayer: Introduces a restaking market to maximize the utilization of Ethereum's staked assets, enhancing security and validator revenue.
• Babylon: Combines Bitcoin's Proof-of-Work with a Proof-of-Stake blockchain, providing tamper-resistant security and cross-chain interoperability.

Blockchain Services

• Sentient: Enables decentralized AI applications by leveraging blockchain's distributed network for scalable and private AI computation.
• Zama: Achieves secure data processing on the blockchain through homomorphic encryption, ensuring privacy without sacrificing functionality.

Key Trends in 2024 and Beyond

AI integration, DeFi on Bitcoin, and specialized blockchains are dominating the blockchain space. Projects like 0G Labs and Sentient are leading in AI, while Babylon is strengthening Bitcoin's role in DeFi. In the near future, Monad, Berachain, and Story Protocol are expected to launch their mainnets.

Conclusion

The 2024 crypto venture capital landscape exhibits a cautiously optimistic outlook, characterized by a rebound in financing activity and growing institutional interest. The shift towards mid-sized funds and the continued dominance of emerging funds indicate an industry that is maturing and adapting to evolving market dynamics. While venture capital has seen a short-term decline and longer fundraising cycles, the sustained focus on early-stage venture capital and emerging trends like AI integration highlight a resilient ecosystem preparing for future growth. Overall, the crypto industry demonstrates potential strength, suggesting new momentum may be on the horizon.

Related Reading: 2024 Financing Report: 1,259 Financings, $9.615 Billion, Market Trends Similar to Last Year