46% of Crypto Venture Capital Flows Into US Startups

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Key Takeaways:

U.S. startups continue to attract the most investor attention in the crypto venture capital sector, securing 46% of the total funding.
The best areas for investment in crypto VC are stablecoins, infrastructure, and Web3.
Despite signs of a technical rebound in crypto venture capital, market conditions remain uncertain, though a resurgence is possible in 2025.

This article is not just about numbers but includes a comprehensive picture of the venture capital investment landscape during the relevant fiscal quarter for the crypto and blockchain sectors.

While the cryptocurrency market as a whole demonstrated remarkable growth, consequently showing an improvement, the venture capital industry failed to exhibit the same trend of acquiring higher growth rates. It continues to remain relatively calm compared to the earlier times. However, there are several factors indicating the potential of a change. The year 2025 will possibly see a trend of the growth of stablecoin, the growing interest in tokenization, the occurrence of decentralized finance (DeFi), its adopting traditional finance (TradFi) and the joining of crypto with artificial intelligence (AI) as factors that will all contribute to a resurgence. The new numbers are insights to the market and a list of areas that are going to be very interesting during the following year end.

Table of Contents

Overview of Capital Activity in the Crypto & Blockchain Industry

It was the year 2024, which was quite a period owing to the crypto market, which had generated a sudden upturn of $1.6 trillion and a total market capitalization that was touching the $3.4 trillion apex by 2024. In 2024, the market growth was primarily driven by a significant increase in Bitcoin prices, alongside the rise of meme coins and AI-focused cryptocurrencies. It is interesting to note that while the cryptocurrency price movement was very strong, the investment in venture capital in the field of start-up companies related to cryptocurrencies did not see such enthusiasm. The first sectors that were labeled as hot a couple of years ago, such as DeFi, gaming, the metaverse, and NFTs, were not able to get the investors’ attention to a big extent this time. Core infrastructure in the crypto market has become highly competitive, leaving fewer opportunities for early-stage investments.

The increasing interest rates accompanied by the caution exhibited by large investment funds are making it difficult for startups to find capital. The fact that the risk-averse sentiment has been evident has had a negative impact on the entire venture capital industry, whereas the perceived volatility of the crypto venture sector has been the singular most affected. In spite of this, there are hints of a change in investor sentiment, which could hint at a potential recovery of crypto venture capital in 2025. This optimistic outlook is supported by emerging trends, including stablecoins, tokenization, DeFi-TradFi integration, and crypto-AI projects.

Key Statistics

Total Investment: In Q4 2024, the amount of money that was invested in crypto and blockchain startups was equal to $3.5 billion, which is a 46% increase over the previous quarter.
Total Deals: Nevertheless, only 416 deals were closed, which is a 13% decrease from the previous quarter during the same period. It means that although the deal size was bigger, fewer startups were able to attract the necessary funding to operate.
Investment by Stage: The other 40% was used in later-stage deals and that was the balance of the total money invested. The majority of the funds were invested in the first stages of the company, which represented 60% of the total investment, while the rest of the money was invested in the last stages.
Valuations: In Q2 and Q3 of 2024, median valuations for crypto deals increased significantly compared to the broader VC market. However, growth moderated in Q4, signaling a potential stabilization.
Investment Sectors: The first position of the stablecoin companies in terms of the biggest beneficiaries is followed by the runners-up, which are infrastructure and Web3 focused ones. It is worthy of note that the Web3, DeFi, and infrastructure sectors were the most engaging in terms of the number of deals

Share of Crypto VC Capital Invested by Category

Geographic Regions: The US led in both total investment (46%) and number of deals (36%), followed by Hong Kong (17%), the United Kingdom (6.8%), and Canada (6%).
Fundraising: Despite growing interest in crypto venture capital, only $1 billion was raised across 20 new funds, highlighting a challenging fundraising environment.

The US also led in the number of deals, accounting for 36% of the total. Source: Galaxy Digital

Detail Analysis of Venture Capital Flows

Capital Concentrates in the US and Promising Sectors

An impressive 46% of crypto venture funding for US companies in Q4 2024, further the perception that the American market is too strong to ignore. The crypto space has always been an ecosystem for creativity and financial activity, and it is no different now. The motivation for this demand could be due to the following factors in multiple ways:

Mature Ecosystem: In the US, there is a fully-functioning startup and venture capital sector, an aggregate of a wide-ranging number of institutional investment funds, angel investors, and crypto experts.
Technological Innovation: The US is known for advanced tech startups leading the way in such areas like blockchain, AI, and Web3, where they apply it to create new apps. As for VCs, these are exactly the kind of enterprises that attract a lot of money from them.
Political Environment: The possibility of a political atmosphere in the US that is more inclined towards cryptocurrencies has been one of the supporting factors for more and more investment in the sector.

At the same time, the US is the main player in the field of digital tokens, at the same time, Hong Kong is following it closely and has become the right place for crypto venture capitalists, with a 17% share of the total investment. This trend is indicative of the fact that the Asian market is gradually gaining more and more influence and is being acknowledged in the crypto world.

Stablecoin projects were on top of the list as they secured the most significant share (17.5%) of the $649 million total investment in Q4. Tether contributed a significant portion of the funding, thus securing $600 million investment. Infrastructure projects followed as the second most well-funded sector, attracting 16% of the total investment, amounting to $592 million. Web3-related projects secured $587.6 million, accounting for 15.8% of the total investment. These numbers show that the number of tokens will shrink, but the remaining ones are likely to grow in prominence as adoption increases.

Factors Influencing Capital Flows

Some of the key factors that have been the driving force behind the capital flows in Q4 2024 include the following:

Market Recovery: Despite the fact that the cryptocurrency market saw impressive recovery, the increase in venture capital investments did not keep pace with it, signaling perhaps a change in investor sentiment toward Bitcoin (from early 2023), which in turn, has been one of the factors providing optimism to the market although this sector has been slow to respond to it.
Stablecoin Popularity: The surging use and popularity of stablecoins are the main driving forces for substantial investments, including the major contribution of Tether’s capital raise of $600 million.
DeFi & TradFi Integration: If the trend continues as it is, then projects that appositely bridge the gap between decentralized finance (DeFi) and traditional finance (TradFi) would not be forgotten.
AI & Crypto: In the same vein, the overlapping crypto and AI is set to accrue some new investment opportunities.
High Interest Rates: The curtailed high-interest season favors precautionary steps in investing among the venture capital funds thereby resulting in the decline of the new funds that were formed (20) and the amount of money they could raise which was minimally just $1 billion in Q4.
Regulatory Uncertainty: Unclear regulations in turn means the shadow cast on the crypto venture landscape is offset, thus, the attraction of investment decisions especially for conservative firms becomes difficult.

Potential for Future Growth

Several factors indicate that the crypto venture capital market has substantial growth potential.

Emerging Technologies: The predicted growth and the development of stablecoins, tokenization, DeFi, and crypto-AI technologies are some of the factors that might influence the investors.
Favorable Policies: A transition of more relaxed oversight rules at the higher level in the US, plus in some vital markets can get a widespread investment increase.
Institutional Investors: The potentially new interest from massive institutional investors as well as substantial financial entities could bring in considerable capital to the sector.
Consistent Pre-Seed Activity: The rate of continuation of seed deals which happens both in pre-seed and anyone going for seed are some of the main signs of maintaining high innovation and entrepreneurship in the coming days.

In terms of the deal side, it has a higher share of pre-seed deals that is stable, and remains at a similar level of the previous cycles. At the same time, we manage to follow the rate of pre-seed deals as it is a method to check if entrepreneurs act robustly.

Crypto VC Deal Count by Stage

Observations and Conclusion

Crypto market received signals that it may start recovering, but still, the venture capital field is calmer than it was at the top of the market. This rise was mainly because market interest was heavily focused on Bitcoin and meme coins, while speculative tokens were overshadowed by the growing prominence of stablecoins. Nonetheless, sectors such as stablecoins, tokenization, DeFi, and crypto-AI show strong growth potential, positioning 2025 as a pivotal year for the crypto industry.

Pre-seed rounds indicate sustained interest in new ideas and technologies within the crypto sector. Although the crypto funds are still struggling with the funds collection, there is a change coming in the market now which is coming from more crypto-based policies from the new presidency of the US.

So what does the analysis indicate? That this will likely be a period of transition where the market will be shifting the emphasis away from meme coins to more practical applications as well as infrastructure-building projects thereby forming the basis for a stronger and more stable crypto venture capital industry in the coming years.