While the prices of digital assets rallied in 2024 in anticipation of Donald Trump’s taking office in the White House, crypto venture funding took the cautious wait-and-see approach for most of the year.
According to a Pitchbook data report for Q4 2024, crypto VC funding poured some $2.5 billion into startups. However, the statistics show that while the figures were up 13.6% from Q3 2024, the number of deals struck was at least 14.6% lower. On the other hand, at least $10 billion was spent for the entire year on 1,940 deals, compared to $10.3 billion in 2023.
VC Funding Fell Flat
Despite the impressive market performance of many digital assets led by the flagship cryptocurrency, the performance of crypto VC funding for blockchain and crypto startups failed to impress in 2024. Observers would have expected that BTC’s over 100% surge in 2024 would have led to a significant performance in crypto venture funding. However, compared to 2023, the correlation has weakened despite Bitcoin reaching several all-time highs, including the six-figure mark.
Market Narrative Favored Bitcoin
As per the report, the market narrative greatly favored Bitcoin, overshadowing other digital asset investment opportunities. Nonetheless, the 2,153 funding rounds in 2024, totaling just over $10 billion, were significantly lower than those attained in 2021, 2022, and 2023. The figure was much lower than the $13.6 billion reported by the DeFi Report for the same year. Funding for DeFi and blockchain infrastructure increased by 85% and 57%, respectively, where Bitcoin-based DeFi use cases, including stablecoins, lending protocols, and perpetual swaps, contributed highly to this growth. Commenting on the contents of the reports, Dragonfly General Manager Rob Hadick Stated:
“It’s Surprising, VC funding has not sped up more quickly relative to 2023 with bitcoin up over 150% YTD [year to date] […]most VCs do not yet have the confidence to deploy their remaining funds in earnest until they raise (or at least become comfortable they will be able to raise) new funds.”
Rebound in Funding in 2025
Regarding what lies ahead, experts forecast a rebound in crypto venture funding deals in most of 2025, considering the rising cryptocurrency prices and the dynamic changes within the digital asset industry. Based on the comparison method used, the Pitchbook report further predicted that crypto VC funding could attract at least $18 billion in new capital in 2025, representing a 32% to 56% increase relative to 2024. According to Galaxy Digital, there could be a 50% year-over-year growth in crypto venture funding deals in 2025. Nonetheless, both predictions are still lower than the 2022 peak, where over $30 billion was allocated to crypto VC funding.
End of Fintech Winter
A Bloomberg report noted that the renewed interest in digital assets highlighted the beginning of the end of the “fintech winter” that has recently reduced crypto venture funding deals because of tight regulations and high interest rates. The renewed interest in the role of stablecoins in international payment settlements is one aspect that will capture investors’ attention in 2025 and beyond.
Conclusion
While crypto venture funding could have taken a slow approach in 2024, analysts predict crypto VCs are cautiously optimistic about 2025 and beyond. There’s a chance that the levels could go higher than 2024, but it will take time before they reach the 2021-2022 levels. Startups with timely products that fit the market and have tangible user adoption will be best positioned to secure capital in 2025.
Frequently Asked Questions (FAQs)
What is venture capital financing?
VC involves funding crypto startups and early-stage companies that show high growth potential. The investor receives an equity stake through a security instrument.
How do crypto startups receive seed funding?
Investors provide startups with initial investment during the nascent stage, which business owners use to fund the startup in exchange for a return on investment, which may include a stake in their company or a share of profit.
How else do venture capitalists help businesses?
Venture Capitalists can connect startups with the global business market besides investing in ideas to transform industries, enabling innovators to move to the next stage.
What are the benefits of venture capital funding?
In addition to financial support, VCs can offer valuable business expertise and connections to aid startup growth and success.
References
Appendix Glossary for Key Terms
Bull Market: A situation in financial markets where prices for securities rise continuously.
Venture Capitalist: An investor who offers startups and small companies capital in exchange for equity.
Blockchain: A distributed database that maintains a continuously growing list of ordered records called blocks.
Crypto: A type of digital currency that enables users to make payments directly to each other through an online system.
DeFi: A decentralized financial system that uses blockchain technology, enabling users to execute financial transactions without relying on traditional institutions.
