Author: insights4.vc
Compiled by: Felix, PANews
Driven by key milestones such as the launch of a spot Bitcoin ETF in January 2024 and the election of a crypto-friendly US president and Congress in November, the crypto market experienced significant growth in 2024. The market capitalization of liquid cryptocurrencies soared to $3.4 trillion (up 88% year-over-year), with Bitcoin's market value growing by nearly $1 trillion to reach nearly $2 trillion by year-end. Bitcoin's rally accounted for 62% of the overall market growth, while the hype around Memecoins and AI tokens also helped drive Bitcoin's ascent, as these tokens dominated on-chain activity, particularly on Solana.
Despite the market recovery, the crypto venture capital space remains challenging. The limited venture opportunities provided by the dominant trends of Bitcoin, Memecoins, and AI agent tokens, as they primarily leverage existing on-chain infrastructure. Previously hot sectors like DeFi, gaming, the metaverse, and NFTs have failed to attract significant new attention or capital. Incumbent infrastructure firms face intensifying competition from traditional financial intermediaries, as regulatory reforms are expected under the new US administration.
Emerging trends such as stablecoins, tokenization, DeFi-TradFi integration, and the convergence of crypto and AI show promise but remain in their nascent stages. 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, generalist VC firms have largely remained cautious and distanced themselves from the crypto market.
According to Galaxy Research data, venture capitalists invested $3.5 billion in crypto and blockchain-focused startups in Q4 2024, up 46% quarter-over-quarter. However, the number of transactions declined 13% quarter-over-quarter to 416 deals.
Annual Breakdown of Crypto Venture Investments (2016-2024)
Throughout 2024, the total venture capital investment in cryptocurrency and blockchain startups was $11.5 billion across 2,153 transactions.
According to PitchBook's "2025 Enterprise Technology Outlook", senior analyst Robert Le predicts that by 2025, the annual investment in the crypto market will exceed $18 billion, with multiple quarters exceeding $5 billion. This represents a significant increase from 2024, but still remains 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 focus areas for future innovation. These factors, combined with emerging trends, can help drive a resurgence in venture capital activity.
Capital Investment and Bitcoin Price
Historically, there has been a strong correlation between Bitcoin's price and the 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.
Possible Explanations:
Waning Allocation Interest: Institutional investors may be hesitant due to regulatory uncertainty and market volatility.
Shifting Market Narrative: The current market narrative favoring Bitcoin may be obscuring other crypto investment opportunities.
Venture Capital Headwinds: A broader downturn in the venture capital market is impacting crypto investments.
Infrastructure Dominates Crypto Venture Investments
Total Funding by Sector in 2024 (USD)
According to The Block data, in 2024, infrastructure dominated crypto venture investments, 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.
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, NFT and gaming remain focal points, with over 610 deals.
Enterprise blockchain funding declined significantly, down 69% year-over-year, from $536 million in 2023 to $164 million.
Web3 funding has shown some resilience, raising $3.3 billion in the past two years, close to the $3.4 billion raised in 2021-2022. The growth is driven by emerging trends like SocialFi, Crypto AI, and DePIN. DePIN has become a fast-growing vertical, attracting over 260 deals and nearly $1 billion in funding.
DeFi experienced a strong rebound 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 Investments 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 funding increased significantly to 40% of the total capital, up from 15% in the previous quarter.
Most Active Investors
In 2024, Animoca Brands led the venture capital activity with over 100 investments, followed by OKX Ventures with over 80 deals. Cogigent Ventures, Binance Labs, and Foresight Ventures each completed around 60 investments, while The Spartan Group, Big Brain Holdings, and Robot Ventures completed over 50 deals. Polychain Capital and Amber Group maintained over 40 investment activities.
Venture Capital Funds
Among angel investors, the most active was Sandeep Nailwal (Polygon founder) with over 40 investments, 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 investments, while Mert Mumtaz was slightly less active but still very engaged.
Angel Investors
Crypto Venture Fundraising
According to Venture Capital Journal data, venture capital fund raising in 2024 fell to the 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-on-quarter since Q3 2023.
Crypto Venture Capital Financing Situation from 2017-2024
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-on-year, the decrease in allocator interest led to a significant reduction in fund size. The median and average fund sizes in 2024 fell to their lowest levels since 2017, highlighting the increasingly challenging financing environment.
Shift Towards Mid-Sized Funds
Historically, small funds (under $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: Limited number of startups requiring large amounts of capital
Valuation Risks: 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 launch its first fundraise 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 led 2024's project financing record, surpassing Monad and cementing its leadership in the AI-blockchain domain.
Polymarket: A decentralized prediction market that gained significant attention during the 2024 US presidential election, showcasing the potential for rapid Web3 adoption, despite post-event metric declines.
Blockchain Infrastructure
EigenLayer: Introduces a restaking market to maximize the utilization of Ethereum's staked assets, enhancing security and validator rewards.
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 blockchains 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 landscape. 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 crypto venture capital landscape in 2024 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 underlying strength, suggesting the potential for new momentum to emerge.
