Introduction
2024 was a banner year for crypto markets, bookended by the launch of spot-based Bitcoin ETPs in January and the election of the most pro-crypto President and Congress in American history in November. In total, the liquid crypto market added $1.6 trillion to its market cap in 2024, finishing the year up 88% YoY at $3.4 trillion. Bitcoin alone added $1 trillion to its market cap, finishing the year near $2 trillion. Crypto narratives in 2024 were driven on one side by this meteoric Bitcoin rise – which accounted for 62% of the total market gain – and by memecoins and AI on the other. For most of the year, memecoins were the hot meta, with most onchain activity occurring on Solana. In the second half of the year, coins operated by AI agents took the spotlight in ex-Bitcoin crypto land.
Crypto VC was still difficult in 2024. None of these primary metas – Bitcoin, memecoins, AI agents – are particularly suited to venture capital. Memecoins can be launched with a few clicks of a button, and both memecoins and AI agent coins live almost exclusively onchain, making use of existing infrastructure primitives. Hot sectors from the prior market cycle, such as DeFi, gaming, metaverse, and NFTs, either failed to capture significant market attention or have already been built, requiring less capital and making new entrepreneurship more competitive. The picks and shovels plays of crypto market infrastructure have largely been built and are now later stage, and with anticipated regulatory changes in the U.S. under the next administration, these sectors will likely see competition from entrenched traditional financial services intermediaries. There are signs of new metas emerging that could be significant drivers of new capital inflow, but these range from immature to very nascent: among those that stand out are stablecoins, tokenization, DeFi integrating with TradFi, and the overlap of crypto and AI.
Macro and wider market forces have also continued to present headwinds. The high rates environment continues to pressure the venture industry, with allocators less willing to venture further out on the risk curve. This phenomenon has squeezed the entire venture capital industry, but given its perceived riskiness, the crypto venture sector may be particularly affected. Meanwhile, large, generalist venture capitalist firms have still mostly avoided the space, perhaps still feeling cautious after the blowups of several prominent, venture-backed firms in 2022.
Thus, while significant opportunity exists in the future, both through the resurgence of existing primitives and narratives or the emergence of new ones, crypto venture capital remained competitive and muted compared to the manias of 2021 and 2022. Deals and capital invested both rose, but new fund count was stagnant and capital allocated to venture funds declined, creating a particularly competitive environment that favored founders in their valuation negotiations. Broadly speaking, venture investment still remains far below levels seen in the prior market cycle.
But the growing institutionalization of bitcoin and digital assets, as well as the growth of stablecoins and the possibility that a new regulatory environment may finally herald some integration between DeFi and TradFi, also point to new opportunities for innovation, and we expect that 2025 could see a meaningful resurgence in venture capital activity and interest.
Key Takeaways
Venture capital investment in crypto startups was $3.5bn (+46% QoQ) across 416 deals (-13% QoQ) in Q4 2024.
For the totality of 2024, venture capitalists invested $11.5bn into crypto and blockchain focused startups across 2153 deals.
Early-stage deals captured the most capital investment (60%), while later stage deals accounted for 40% of capital invested, a significant increase from Q3’s 15%.
Median valuation across venture capital deals rose in Q2 and Q3, with crypto-specific deal valuations rising at a faster rate than the broader VC industry, but was flat QoQ in Q4.
Stablecoin companies raised the most capital, led by Tether’s $600m raise from Cantor Fitzgerald, followed by Infrastructure and Web3 startups. Web3, DeFi, and Infrastructure companies accounted for the most deals.
The most capital invested went to startups headquartered in the U.S. (46%) in Q4, with Hong Kong companies rising to capture 17% of all the capital invested. On deal count, the U.S. led with 36%, followed by Singapore (9%), and United Kingdom (8%).
On the fundraising side, allocator interest in crypto-focused venture funds ticked down to $1bn across 20 new funds.
At least 10 crypto venture funds raised $100m+ in 2024.
Venture Investing
Deal Count & Capital Invested
In Q4 2024, venture capitalists invested $3.5bn (+46% QoQ) into crypto and blockchain-focused startups across 416 deals (-13% QoQ).
Through all of 2024, venture capitalists invested $11.5bn into crypto and blockchain startups across 2153 deals.
Capital Invested & Bitcoin Price
The multi-year correlation between Bitcoin price and capital invested into crypto startups seen during prior cycles has spent the last year struggling to recover. Bitcoin has risen significantly since January 2023 while venture capital activity has struggled to keep pace. Weak allocator interest in crypto venture, and venture broadly, combined with crypto market narratives that favor Bitcoin and have left out many of the hot narratives from 2021 can partially explain the divergence.
Investment by Stage
In Q4 2024, 60% of venture capital was invested in early-stage companies, while 40% went to later stage companies. VCs raised new money in 2024, and crypto-native funds may still have access to dry powder from large raises several years ago. The shift from Q3, with a growing portion of capital going to later stage companies, can be partially explained by Tether’s reported $600m raise from Cantor Fitzgerald.
On the deal side, the share of pre-seed deals rose slightly and remains healthy relative to prior cycles. We track the percentage of pre-seed deals as a way to gauge the robustness of entrepreneur behavior.
Valuation & Deal Size
VC-backed crypto company valuations declined significantly in 2023, with Q4 2023 reaching the lowest level since Q4 2020. However, valuations and deal sizes began to rebound in Q2 2024 as Bitcoin made new all-time highs. In Q2 and Q3 2024, valuations hit their highest levels since 2022. The rise in crypto deal sizes and valuation in 2024 tracks with similar rises across the broader VC landscape, though crypto has rebounded more sharply. Q4 2024 deals had a median pre-money valuation of $24m and average deal size of $4.5m.
Investment by Category
Companies and projects in the “Web3/NFT/DAO/Metaverse/Gaming” category raised the largest share of crypto VC capital in Q4 2024 (20.75%), totaling $771.3m. The three largest deals in this category were Praxis, Azra Games and Lens, raising $525m, $42.7m, and $31m respectively. DeFi’s dominance as a share of total crypto VC investment is attributed to Tether’s $600m deal with Cantor Fitzgerald, who took a 5% stake in the company (stablecoin issuers fall into our high-level DeFi category). While this deal is not a traditional VC structured deal, we included it in our data set. Removing Tether’s deal would place the DeFi category as the 7th by capital invested in Q4.
In Q4 2024, crypto startups building Web3/NFT/DAO/Metaverse and Infrastructure products saw 44.3% and 33.5% QoQ increases respectively in their share of total quarterly crypto VC investment. This increase in capital allocation as a percentage of total capital deployed is largely attributed to significant QoQ decrease in crypto VC capital allocation towards Layer 1 and crypto AI startups down 85% and 55% respectively since Q3 2024.
If we break down the larger categories in the charts above into more granular segments, crypto projects building stablecoins raised the largest share of crypto VC investment in Q4 2024 (17.5%), totaling $649m across 9 tracked deals. However, Tether’s $600m deal represents most of the total capital invested into stablecoin firms in Q4 2024. Crypto startups developing infrastructure raised the second most VC capital at $592m (16%) across 53 tracked deals in Q4 2024. The three largest crypto infrastructure deals were Blockstream, Hengfeng Corporation, and Cassava Network, raising $210m, $100m, and $90m respectively. Following crypto infrastructure, Web3 startups and exchanges raised the third and fourth most funding from crypto VCs, totaling $587.6m and $200m respectively. Notably, Praxis was the largest Web3 deal and second largest deal overall in Q4 2024, raising a whopping $525m to build an “internet-native city.”
In terms of deal count, Web3/NFT/DAO/Metaverse/Gaming led the way with 22% of deals (92) driven by 37 gaming deals and 31 Web3 deals. The largest gaming deal in Q4 2024 was Azra Games raising $42.7m in their Series A round. Infrastructure and Trading/Exchange/Investing/Lending followed with 77 and 43 deals respectively in Q4 2024.
Projects and companies providing crypto infrastructure ranked second in deal count with 18.3% of the total deals (77), an 11 point QoQ increase. Following crypto infrastructure, projects and companies building Trading/Exchange/Investing/Lending products ranked third in deal count with 10.2% of the total deals (43). Notably, crypto companies building wallets and payment/reward products had the largest QoQ increase in deals at 111% and 78% respectively. While these QoQ increases are large in percentage terms, wallet and payment/reward startups only accounted for 22 and 13 deals respectively in Q4 2024.
Breaking down the larger categories in the charts above into more granular segments, projects and companies building crypto infrastructure had the highest deal count (53) across all sectors. Gaming and Web3 related crypto companies followed with 37 and 31 deals completed in Q4 2024, almost an identical order to Q3 2024.
Investment by Stage & Category
Breaking down capital invested and deal count by category and stage gives a clearer picture of what types of companies in each category are raising funds. In Q4 2024, the vast majority of capital in Web3/DAOs/NFTs/Metaverse, Layer 2s, Layer 1s, went to early-stage companies and projects. In contrast, a large share of crypto VC money invested in DeFi, Trading/Exchange/Investing/Lending and Mining went to later stage companies. This is to be expected given the relative maturity of the latter categories versus the former.
Analyzing the distribution of invested capital across different stages in each category reveals the relative maturity of various investment opportunities.
Like the crypto VC capital invested in Q3 2024, a substantial portion of deals completed in Q4 2024 involved early-stage companies. The tracked crypto VC deals in Q4 2024 included 171 early-stage and 58 later stage deals.
Examining the share of deals done by stage in each categories offers insight into the various stages of each investable category.
Investment by Geographic Location
In Q4 2024, 36.7% of all deals involved a company headquartered in the United States. Singapore followed with 9%, United Kingdom had 8.1%, Switzerland had 5.5%, and the UAE had 3.6%.
Companies headquartered in the United States pulled in 46.2% of all venture capital invested, a 17 point QoQ decrease. As a result, VC capital allocation significantly increased for startups based in Hong Kong at 17.4%. The United Kingdom had 6.8%, Canada had 6%, and Singapore had 5.4%.
Investment by Cohort
Companies and projects founded in 2019 took in the largest share of capital, while those founded in 2024 accounted for the greatest number of deals.
Venture Fundraising
Fundraising for crypto venture funds continues to be challenging. The macro environment and turmoil in the crypto market from 2022 and 2023 has combined to dissuade some allocators from making the same level of commitments to crypto venture investors that they did in 2021 and early 2022. At the start of 2024, investors widely believed that rates would recede significantly over 2024, though rate cuts have only begun to materialize in the back half of the year. The total capital allocated to venture funds has continued to decline QoQ since Q3 2023, although the number of new funds rose throughout 2024.
On an annualized basis, 2024 was the weakest year for crypto VC fundraising since 2020, with 79 new funds raising $5.1bn, well below the frenzy of 2021-2022.
While new fund count did tick up slightly YoY, the decline in allocator interest has also contributed to VCs raising smaller funds, with the median and average fund sizes in 2024 reaching their lowest levels since 2017.
At least 10 crypto-focused venture funds that actively invest in crypto and blockchain-focused startups raised more than $100m for new funds in 2024.
Summary
Sentiment is improving and activity is rising, though both are still well below prior highs. While liquid cryptoasset markets have recovered significantly from the end of 2022 and beginning of 2023, venture activity still remains well below prior bull markets. Prior bull runs in 2017 and 2021 featured a high correlation between VC activity and liquid crypto asset prices, but for the last two years activity has remained depressed while cryptos have rallied. The venture stagnation is due to a number of factors, including a “barbell market” that has seen Bitcoin (and its new ETFs) in center stage and marginal net new activity coming from memecoins, which are difficult to fund and have questionable longevity. Enthusiasm is rising for projects at the intersection of AI and crypto, and anticipated regulatory changes could open the door for opportunities in stablecoins, DeFi, and tokenization.
Early-stage deals continue to lead the way. Despite the VC headwinds, interest in early-stage deals continues to bode well for the long-term health of the broader cryptocurrency ecosystem. The later stage cohort gained ground in Q4, but mostly on the back of Cantor Fitzgerald’s $600m investment into Tether. Nonetheless, entrepreneurs continue to find willing investors for new, innovative ideas. Projects and companies building stablecoins, AI, DeFi, tokenization, L2s, and bitcoin-related products are among the categories we view doing well in 2025.
Spot ETPs may be pressuring funds and startups. Several high-profile investments in the spot-based Bitcoin ETPs in the United States by allocators suggest that some large investors (pensions, endowments, hedge funds, etc.) may be gaining exposure to the sector via the large, liquid vehicles rather than turning to early-stage VC investing. Interest in spot-based Ethereum ETPs has begun to increase, and should that continue or even if new ETPs launch covering other alternative layer 1 blockchains, demand for exposure to segments like DeFi or Web3 could flow to the ETPs rather than to the venture complex.
Fund managers still face a difficult environment. While the number of new funds in 2024 ticked higher YoY, the total capital allocated to crypto venture funds was slightly below 2023. Macro continues to present headwinds for allocators, but material shifts in the regulatory environment could see a resurgence of allocator interest in the space.
The United States continues to dominate the crypto startup ecosystem. Despite a remarkably tricky and often hostile regulatory regime, companies and projects headquartered in the United States continued to account for most deals completed and most capital invested. The incoming presidential administration and Congress are set to be the most pro-crypto in history, and we expect that U.S. dominance will increase, particularly if certain regulatory matters solidify as expect, such as stablecoin frameworks and market structure legislation, which would allow traditional U.S. financial services firms to enter the space in earnest.
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