2024 Cryptocurrency Venture Capital Landscape: Infrastructure Project Financing Active, Fundraising Weak

In 2024, benefiting from the launch of spot Bitcoin ETFs and a supportive political environment for encryption in the United States, the encryption market experienced significant growth. The market capitalization of liquid cryptocurrencies reached $3.4 trillion by the end of the year, an 88% year-on-year increase. Bitcoin's market capitalization approached $2 trillion by the end of the year, accounting for 62% of the total market increase. The memecoin and AI token craze also propelled Bitcoin's rise, with these tokens dominating on-chain activity, particularly on Solana.

Despite the market recovery, the encryption venture capital sector still faces challenges. Major trends such as Bitcoin, memecoin, and AI agent tokens offer limited venture capital opportunities. Previously popular areas like DeFi, gaming, the metaverse, and NFTs have failed to attract significant new attention or capital. Mature infrastructure companies face increasingly fierce competition from traditional financial institutions.

Emerging trends such as stablecoins, tokenization, DeFi-TradFi integration, and the intersection of encryption and AI show promise, but are still in the early stages. Macroeconomic pressures have hindered high-risk allocations, disproportionately affecting the encryption venture capital industry. Following the collapse of the encryption market in 2022, most integrated VC firms have remained cautious and stayed away from the encryption market.

According to the data, venture capital invested $3.5 billion in encryption startups in the fourth quarter of 2024, a quarter-on-quarter increase of 46%. The total investment for the year amounted to $11.5 billion, with a total of 2,153 transactions. Analysts predict that by 2025, the annual investment in the encryption market will exceed $18 billion, but it will still be lower than the levels of 2021-2022.

The increasing institutionalization of Bitcoin, the rise of stablecoins, and the potential regulatory advancements in the integration of DeFi and TradFi are all key areas of future innovation. These factors, combined with emerging trends, are expected to promote a revival of venture capital activities.

Capital Investment and Bitcoin Price

Historically, there has been a strong correlation between the price of Bitcoin and the amount of encryption startup investments, but since January 2023, the correlation has noticeably weakened. Bitcoin has reached new highs, but venture capital activities have struggled to keep pace.

Possible reasons include:

• Institutional investors hesitate due to regulatory uncertainty and market volatility.
• The current market narrative favors Bitcoin, which may overshadow other encryption investment opportunities.
• The broader venture capital market downturn has impacted encryption investments.

Infrastructure Track Dominates Encryption Venture Capital

In 2024, infrastructure-led encryption venture capital attracted over 610 transactions, reaching $5.5 billion, a year-on-year increase of 57%. The focus is on scaling blockchain networks through L2, improving speed, reducing costs, and enhancing scalability. Modular technology received substantial funding, while liquid staking protocols and developer tools remain key priorities.

NFT and gaming startups raised $2.5 billion, slightly higher than in 2023. Despite stable funding, NFT market activity has declined with the rise of memecoins. Corporate blockchain funding has plummeted by 69% to $164 million.

Web3 financing demonstrates resilience, raising $3.3 billion within two years. Emerging trends such as SocialFi, encryption AI, and DePIN drive growth. DePIN has become a rapidly growing sector, attracting over 260 transactions and nearly $1 billion in funding.

DeFi is experiencing a strong recovery in 2024, achieving over 530 financings, an 85% year-on-year increase. Bitcoin-based DeFi use cases are the key drivers.

The encryption industry is still highly concentrated in the early financing stage. Early-stage transactions account for 60% of capital investment, while later-stage financing accounts for 40%, a significant increase from 15% in the third quarter.

Most Active Investors

In 2024, Animoca Brands leads with over 100 investments; OKX Ventures with over 80; Cogigent Ventures, Binance Labs, and Foresight Ventures each with about 60; The Spartan Group, Big Brain Holdings, and Robot Ventures each with over 50; Polychain Capital and Amber Group maintain over 40 investment activities.

Among angel investors, Sandeep Nailwal(, the founder of Polygon), is the most active, participating in over 40 investments; Paul Taylor and DCF God each have more than 30; Anatoly Yakovenko(, the founder of Solana), Santiago R. Santos, and Balaji Srinivasan each have over 25; Mert Mumtaz is slightly behind but still active.

encryption risk financing

In 2024, venture capital fundraising fell to a six-year low, with 865 funds raising $10.47 billion, a decrease of 18% compared to 2023.

Affected by macroeconomic conditions and market fluctuations, encryption venture capital financing still faces pressure. Allocators are reducing their commitments to encryption venture capital funds, reflecting a shift from the previous bullish sentiment. Although interest rate cuts are expected in 2024, meaningful cuts are not anticipated until the second half of the year, and risk capital allocation continues to decline quarter by quarter.

In 2024, financing in the encryption venture capital fund market is weak, with 79 new funds raising $5.1 billion, the lowest since 2020. Although the number of new funds has slightly increased, a decrease in investor interest has led to a significant reduction in size. The median and average fund sizes have fallen to their lowest levels since 2017, highlighting the severe fundraising environment.

Transition to Medium-Sized Funds

Historically, small funds ( below 100 million USD ) dominated in encryption venture capital financing. However, since 2018, there has been a clear shift towards medium-sized funds ( between 100 million and 500 million USD ).

Large funds ( over 1 billion USD ) rapid growth from 2019 to 2022, but no appearance in 2023-2024, reasons include:

• Deployment difficulties: Limited startups require substantial funding
• Valuation risk: Large investments drive up valuations, increasing risk.

Nevertheless, well-known funds like Pantera Capital and Standard Crypto with $500 million ( remain active, expanding their business scope beyond cryptocurrencies to areas such as AI. Pantera Fund V aims to raise $1 billion and will have its first fundraising in July 2025.

Among the 10 funds raising over $100 million in 2024, the largest closed-end fund is Fund III managed by Paradigm.

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Investment Trends to Watch in 2024

1. Monad: An EVM-compatible L1 blockchain that achieves 10,000 transactions per second, a 1-second block time, and single-slot finality.

2. Farcaster: A social network that allows users to control their data, using Ethereum to secure a non-custodial social graph.

3. Berachain: Proof of Liquidity ) PoL ( consensus connects network security with liquidity supply, EVM compatibility simplifies DeFi application deployment.

4. Story Protocol: Changes IP management through on-chain registration, automatic licensing, and token-bound account monetization.

5. 0G Labs: Combining blockchain scalability with AI-driven processes, featuring a data availability layer and a decentralized AI operating system.

6. Polymarket: A decentralized prediction market that gained significant attention during the 2024 U.S. presidential election.

7. EigenLayer: Introduces a re-staking market to maximize the utilization of Ethereum staking assets.

8. Babylon: Combines Bitcoin's proof of work with proof of stake blockchain to provide cross-chain interoperability.

9. Sentient: Utilizing a distributed blockchain network for scalable private AI computing.

10. Zama: Homomorphic encryption for secure data processing on the blockchain.

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Key Trends for 2024 and Beyond

AI integration, Bitcoin DeFi, and dedicated blockchains dominate the blockchain space. 0G Labs and Sentient lead in the AI field, while Babylon strengthens Bitcoin's role in DeFi. Monad, Berachain, and Story Protocol are expected to launch their mainnets.

Conclusion

The 2024 encryption venture capital landscape is cautiously optimistic, with a rebound in fundraising activities and growing institutional interest. The shift towards medium-sized funds and the dominance of emerging funds indicate the maturity of the industry and its adaptation to market changes. Despite short-term declines and extended fundraising cycles, the focus on early-stage venture capital and emerging trends like AI highlight the resilience of the ecosystem. Overall, the encryption industry demonstrates potential strength, suggesting that new momentum may be on the horizon.

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