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Investments in crypto-focused ventures fell by 20% to $2.4bn, while the number of deals fell 17% in Q3 2021, according to Galaxy Digital. Blame was placed on a “barbell market” where Bitcoin and volatile meme coins take centre stage, leaving mid-sized projects scrambling for leftover investments. Despite the decline, the quarter’s investments still represented a 21.5% increase YoY. Galaxy’s report also noted a shift towards early-stage investments, which made up 85% of the total, particularly within blockchain developments. US-based projects received 56% of VC funding.

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Money poured into crypto-related ventures dropped by 20% to $2.4 billion in the third quarter, according to Galaxy Digital. This came about due to a “barbell market”, where Bitcoin and risky meme coins hogged the limelight, leaving medium-sized projects scrounging for scraps. This dip in funding was also paired with a 17% drop in deals, with 478 deals struck in the third quarter, says a report released by the crypto investment firm on October 15.

Even with this drop, however, the $2.4 billion raised this quarter is still a 21.5% leap from the almost $2 billion in funds raised for crypto ventures in the same period last year. This lull can be attributed to a handful of factors, including the rise of Bitcoin’s new ETFs and a spike in meme coin activity, which can be risky to put money into and don’t have a proven track record of sticking around.

This pattern has made major investors shy away from putting in their cash, leaving the crypto market chilly in 2024. Essentially, investors are pouring their money into big market cap cryptocurrencies like Bitcoin and Ether, as well as rolling the dice on meme coins, while medium-sized projects are getting left in the dust.

Galaxy’s report suggests that high demand for spot Bitcoin ETFs from big players like pension and hedge funds might have made these investors turn a blind eye to investing in early-stage crypto ventures. As a result, the link between Bitcoin’s price and crypto venture funding that we’ve seen over the years has gone to pieces.

According to the report, early-stage deals took in the most funding in Q3, accounting for 85% of total investments. This money was largely funnelled into crypto exchanges, crypto trading firms, and companies driving layer 1 blockchains. Crypto companies integrating AI have also seen a significant hop in VC funding this quarter, raising five times more than last quarter.

Among the big gainers were Sentient, CeTi, and Sahara AI, which attracted $85 million, $60 million, and $43 million respectively, says Galaxy. In terms of geographical distribution, US-based crypto companies topped the charts, taking in 56% of all VC funding from 43.5% of the 478 deals in Q3. They were followed by Singapore and the UK.

Looking ahead, Galaxy predicts that VC funding could speed up in Q4 and Q1 of 2025 due to decreasing interest rates and potentially more lenient regulations.

Source: Cointelegraph