Author: insights4.vc Translator: Shan Eoba, Jinse Finance
In 2024, the crypto market saw significant growth, driven by some key milestones: the launch of a spot Bitcoin ETF in January, and the election of a U.S. president and Congress supportive of cryptocurrencies in November. That year, the total market capitalization of liquid crypto assets surged by $1.6 trillion, a year-over-year increase of 88%, reaching $3.4 trillion by the end of the year. Bitcoin contributed $1 trillion to the growth, with a total market value approaching $2 trillion. Bitcoin accounted for 62% of the total market increase, its rise closely linked to the dominant on-chain trends - meme coins and AI-driven tokens, particularly those on the Solana blockchain.
Despite the market recovery, the crypto venture capital (VC) environment continued to face challenges. Key trends such as Bitcoin, meme coins, and AI-agent tokens were largely dependent on existing on-chain infrastructure, offering limited VC opportunities. Previously hot areas like DeFi (decentralized finance), gaming, the metaverse, and Non-Fungible Tokens (NFTs) failed to attract new attention or capital. As the infrastructure space matures, it faces increasingly fierce competition from traditional financial intermediaries, especially in the context of the regulatory reforms expected to be implemented by the new U.S. administration.
Nevertheless, emerging trends such as stablecoins, tokenization, the fusion of DeFi and traditional finance (TradFi), and the intersection of crypto and AI show potential, but are still in the early stages. Meanwhile, macroeconomic pressures (such as high interest rates) have dampened investment allocation to high-risk assets, which has had a particularly pronounced impact on crypto VC. Many generalist VC firms have remained cautious, shying away from the sector after a series of high-profile collapses in 2022.
According to data from Galaxy Research, in Q4 2024, VC investment in crypto and blockchain startups reached $3.5 billion, up 46% quarter-over-quarter. However, the number of deals declined 13% to 416 transactions that quarter.
Throughout 2024, crypto and blockchain startups completed a total of 2,153 deals, raising $11.5 billion.
According to the PitchBook "2025 Enterprise Technology Outlook" report, senior analyst Robert Le forecasts that by 2025, annual investment in the crypto market will exceed $18 billion, with the potential for multiple quarters to surpass $5 billion. While this represents significant growth from 2024, it would still be well below the levels seen in 2021 and 2022.
The increasing institutionalization of Bitcoin, the rise of stablecoins, and potential regulatory progress around the fusion of DeFi and TradFi are set to be key areas of innovation. Combined with emerging trends, these factors are expected to serve as important catalysts for the revival of VC activity.
Capital Investment and Bitcoin Price
Historically, there has been a strong correlation between Bitcoin price and capital investment in crypto startups. However, this correlation has significantly weakened since January 2023. Bitcoin prices have continued to set new highs, while venture capital activity has failed to keep pace.
Possible Reasons:
1. Waning Investor Interest: Institutional investors may be taking a cautious stance due to regulatory uncertainty and market volatility.
2. Shift in Market Narrative: The current market narrative is more Bitcoin-centric, which may be diminishing attention on other crypto investment opportunities.
3. Overall Downturn in Venture Capital Market: The broader downward trend in the VC market is impacting the investment momentum in the crypto space.
Most Attractive Crypto VC Sectors
In 2024, the crypto infrastructure sector dominated VC investment, attracting $5.5 billion across over 610 deals, a 57% year-over-year increase, marking the highest funding in the sector to date (source: The Block). The focus was on scaling blockchain networks through Layer-2 solutions to improve speed, cost, and scalability. Modular technologies (including data availability, shared sequencers, and service-based Rollup solutions) received significant funding, while liquid staking protocols and developer tools were also seen as priority areas.
NFT and gaming startups collectively raised $2.5 billion, slightly above the $2.2 billion in 2023. While funding levels remained stable, NFT market activity declined as the popularity of meme coins rose. The NFT and gaming sectors completed over 610 deals, down from the 936 deals at the 2022 peak, but still maintaining attention. On the other hand, enterprise blockchain funding plummeted 69% year-over-year, from $536 million in 2023 to $164 million.
The Web3 space has shown resilience, raising $3.3 billion over the past two years, nearly matching the $3.4 billion raised in 2021–2022. Growth has primarily come from emerging areas such as SocialFi, the intersection of crypto and AI, and decentralized physical infrastructure networks (DePINs). DePINs have become one of the fastest-growing verticals, attracting over 260 deals and close to $1 billion in funding.
In 2024, DeFi saw a strong rebound, completing over 530 deals, an 85% increase from 2023's 287 deals. Bitcoin-based DeFi use cases (such as stablecoins, lending protocols, and perpetual contracts) were the main drivers of this growth.
As shown in the image, excluding undisclosed rounds, crypto investment remains highly concentrated in the early stages. Early-stage deals attracted the majority of capital investment, accounting for 60%, while later-stage deals increased to 40% from 15% in the previous quarter.
Most Active Investors in 2024
In 2024, Animoca Brands emerged as the leader in venture capital activity, with over 100 funding rounds, followed by OKX Ventures with over 80 rounds. Cogitent Ventures, Binance Labs, and Foresight Ventures each completed around 60 rounds, while The Spartan Group, Big Brain Holdings, and Robot Ventures surpassed 50 rounds. Key players like Polychain Capital and Amber Group maintained a steady pace, completing over 40 rounds.
Among angel investors, Polygon co-founder Sandeep Nailwal participated in over 40 funding rounds, making him the most active, followed by Paul Taylor and DCF God with over 30 rounds each. Solana founder Anatoly Yakovenko, Santiago R. Santos, and Balaji Srinivasan also stood out, completing over 25 rounds, while Mert Mumtaz maintained a consistent level of activity.
Crypto Venture Capital Fundraising
According to the Venture Capital Journal, in 2024, venture capital fundraising reached a six-year low, 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. Both the number of funds and the total fundraising amount decreased by 16% year-over-year.
Crypto venture capital financing still faces pressure due to macroeconomic headwinds and the persistent market volatility of 2022-2023. Allocators have reduced their commitments to crypto venture capital funds, reflecting a shift from the bullish sentiment of 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 allocations have continued to decline quarter-over-quarter since Q3 2023.
Crypto venture capital fundraising was clearly sluggish in 2024, with only 79 new funds raising $5.1 billion, the lowest annual total since 2020. While the number of new funds increased slightly year-over-year, the decrease in allocator interest led to a significant reduction in fund sizes. The median and average fund sizes in 2024 reached their lowest levels since 2017, underscoring the increasingly challenging fundraising environment.
Shift Towards Mid-Sized Funds
Historically, small funds (under $100 million) have dominated crypto venture capital fundraising, reflecting the industry's early-stage nature. However, the trend has shifted notably towards mid-sized funds ($100 million to $500 million) since 2018.
While mega-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 Challenges: 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 include areas like artificial intelligence. Notably, Pantera Fund V, the successor to Pantera Blockchain Fund IV, is set to have its first close on July 1, 2025, with a target of $1 billion.
The table below summarizes the 10 funds that raised over $100 million in 2024. The largest closed-end fund in 2024 was Fund III managed by Paradigm.
Notable Fundraising Rounds in 2024
Monad: An EVM-compatible Layer 1 blockchain that achieves an outstanding throughput of up to 10,000 transactions per second, with a 1-second block time and single-slot finality. Its parallel transaction execution architecture ensures efficiency, making it a preferred choice for developers seeking speed and scalability.
Farcaster: A social network that empowers users to control their data. Its "sufficiently decentralized" design allows interactions without global network approval, using a non-custodial social graph protected by Ethereum. The flagship Warpcast application showcases its potential to redefine social media.
Berachain's Liquidity Proof-of-Stake (PoL) consensus links network security with liquidity supply, allowing validators to stake liquid assets to enhance security while earning rewards. EVM compatibility simplifies the deployment of DeFi applications, solidifying Berachain's position in the decentralized finance ecosystem.
Story Protocol: Transforms intellectual property management through on-chain registration, automatic licensing, and monetization via token-bound accounts supporting ERC-6551. Leveraging the Ethereum Virtual Machine and Cosmos SDK, it provides creators with unparalleled control 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). The company led the 2024 funding round, raising $250 million, surpassing Monad and consolidating its leadership in the AI-blockchain intersection.
Polymarket: A decentralized prediction market that gained significant attention during the 2024 U.S. presidential election, showcasing Web3's potential for rapid adoption even in the face of post-event indicator declines.
Blockchain Infrastructure
EigenLayer: Introduces a restaking market to maximize Ethereum's staked assets, improving 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: Leverages blockchain's distributed network for scalable and private AI computation, enabling decentralized AI applications.
Zama: Achieves homomorphic encryption for secure data processing on blockchains, ensuring privacy without sacrificing functionality.
Key Trends in 2024 and Beyond
AI integration, Bitcoin-based DeFi, and specialized blockchains are driving the blockchain space. Projects like 0G Labs and Sentient are leading in the AI domain, while Babylon is strengthening Bitcoin's position 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 fundraising activity and growing institutional interest. The shift towards mid-sized funds and the continued dominance of emerging managers indicate an industry that is maturing and adapting to evolving market dynamics. While venture capital has seen a short-term decline and extended fundraising cycles, the sustained focus on early-stage investments and emerging trends like AI integration highlight a resilient ecosystem primed for future growth. Overall, the industry demonstrates potential strength, suggesting that new momentum may be on the horizon.
