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

In 2024, the encryption market experienced significant growth, thanks to key milestones such as the launch of the spot Bitcoin ETF in January and the election of pro-encryption policies in November. The market capitalization of liquid cryptocurrencies grew by 88%, reaching $3.4 trillion by the end of the year, with Bitcoin's market capitalization increasing by nearly $1 trillion, approaching $2 trillion. Bitcoin's rise accounted for 62% of the total market increase, while the memecoin and AI token craze also played a boosting role, especially in activities on the Solana chain.

Despite the market recovery, the encryption venture capital sector still faces challenges. Venture capital opportunities provided by major trends such as Bitcoin, memecoins, and AI agent tokens are limited, as they primarily utilize existing on-chain infrastructure. Once popular sectors like DeFi, gaming, the metaverse, and NFTs have failed to attract significant new attention or capital. Infrastructure companies face fierce competition from traditional financial service institutions.

Emerging trends such as stablecoins, tokenization, DeFi-TradFi integration, and the intersection of encryption AI show promise, but are still in the early stages. At the same time, macroeconomic pressures like high interest rates hinder high-risk allocations, disproportionately affecting the encryption venture capital industry. After the collapse of the encryption market in 2022, most comprehensive VC firms have remained cautious and steered clear of the encryption market.

Data shows that in the fourth quarter of 2024, venture capital invested $3.5 billion in encryption and blockchain startups, a quarter-on-quarter increase of 46%. However, the number of transactions decreased by 13% quarter-on-quarter, totaling 416 transactions. The total investment for the year was $11.5 billion, with a total of 2,153 transactions.

Analysis predicts that by 2025, the annual investment in the encryption market will exceed $18 billion, with several quarters surpassing $5 billion. This marks a significant increase compared to 2024, but still falls short of the levels seen in 2021 and 2022. The institutionalization of Bitcoin, the rise of stablecoins, and potential regulatory advancements in the integration of DeFi and TradFi are all key areas for future innovation.

Capital Investment and Bitcoin Price

Historically, there has been a strong correlation between Bitcoin prices and the investment volume in encryption startups. However, since January 2023, this correlation has noticeably weakened. Bitcoin reached an all-time high, yet venture capital activity has struggled to keep up. Possible reasons include:

• Diminished interest in configuration: Institutional investors hesitate due to regulatory uncertainty and market volatility.
• Market narrative shift: Currently, the market narrative favors Bitcoin, which may overshadow other encryption investment opportunities.
• Venture Capital Outlook: A broader downturn in the venture capital market is affecting encryption investments.

Infrastructure Track Dominates Encryption Venture Capital

In 2024, infrastructure leads cryptocurrency venture capital, attracting over 610 deals worth $5.5 billion, a year-on-year increase of 57%. The focus is on expanding blockchain networks through L2 solutions to improve speed, reduce costs, and enhance scalability. Modular technology has 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 steady funding, NFT market activity has declined. Corporate blockchain financing has dropped significantly by 69%, to $164 million.

Web3 financing shows resilience, raising $3.3 billion in the past two years. Emerging trends like SocialFi, encryption AI, and DePIN are driving growth. DePIN has become a rapidly growing vertical, attracting over 260 deals and nearly $1 billion in financing.

DeFi shows a strong recovery in 2024, achieving over 530 funding rounds, an 85% year-on-year increase. Bitcoin-based DeFi use cases are the key driving force.

Except for undisclosed rounds, the encryption industry remains 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 with about 60; The Spartan Group, Big Brain Holdings, and Robot Ventures with over 50; and Polychain Capital and Amber Group maintaining 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 with over 30 investments; Anatoly Yakovenko(, the founder of Solana), Santiago R. Santos, and Balaji Srinivasan each with over 25 investments; Mert Mumtaz is slightly behind but still active.

Encryption Risk Financing

In 2024, venture capital fundraising has dropped to a six-year low, with 865 funds raising a total of $104.7 billion, a decrease of 18% compared to 2023. Encryption venture capital financing still faces pressure, with allocators reducing their commitments to encryption venture capital funds. In 2024, 79 new funds raised $5.1 billion, marking the lowest annual total since 2020. The median and average fund sizes have fallen to their lowest levels since 2017, highlighting the increasingly tough financing environment.

Since 2018, the trend of medium-sized funds between 100 million and 500 million has clearly shifted. Large funds over 1 billion did not appear in 2023-2024, facing deployment difficulties and valuation risk challenges. Well-known funds such as Pantera Capital and Standard Crypto remain active, expanding their business scope to areas outside of encryption.

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

Investment to Watch in 2024

1. Monad: EVM-compatible L1 blockchain with high throughput and fast block generation
2. Farcaster: A social network where users control their data.
3. Berachain: Proof of Liquidity ( PoL ) Consensus
4. Story Protocol: Change in Intellectual Property Management
5. 0G Labs: The combination of blockchain scalability and AI-driven processes
6. Polymarket: Decentralized Prediction Market
7. EigenLayer: Introducing the Re-Staking Market
8. Babylon: The combination of Bitcoin's proof of work and PoS blockchain
9. Sentient: Decentralized AI Application
10. Zama: Secure data processing homomorphic encryption on the blockchain

Key Trends of the Future

AI integration, DeFi on Bitcoin, and dedicated blockchains will dominate the blockchain space. 0G Labs and Sentient are leading in the AI sector, while Babylon strengthens the role of Bitcoin in DeFi. Monad, Berachain, and Story Protocol are expected to launch their mainnets.

Conclusion

The landscape of cryptocurrency venture capital in 2024 is cautiously optimistic, with a rebound in fundraising activities and growing institutional interest. The shift towards mid-sized funds and the dominance of emerging funds indicate industry maturity. Despite a short-term decline, the focus on early-stage venture capital and new trends like AI integration highlight the resilience of the ecosystem. Overall, the cryptocurrency industry demonstrates potential strength, and new momentum may be on the horizon.