Venture capital (VC) firms poured $3.5 billion into crypto and blockchain-focused startups in the last quarter of 2024. The investment, 46% higher than the previous quarter, was spread across 416 deals. Q4 2024 investments brought the total VC investment in the crypto and blockchain sector to $11.5 billion across 2,153 deals.

As shown by data in Galaxy Research’s latest VC funding report, Q4 2024 investment levels were the highest since Q4 2022. Since the FTX collapse triggered a crypto market downturn that saw bitcoin (BTC) dropping below $17,000 in December 2022, VC interest in crypto and blockchain startups seemingly cooled.

According to the Galaxy Research report, VCs largely avoided the space, which saw several prominent venture-backed firms fail due to the fallout from the collapse of Sam Bankman-Fried’s empire. In fact, the report assesses 2024 as the weakest year for crypto VC fundraising since 2020, with 79 new funds raising $5.1 billion, well below the frenzy of 2021-2022.

While activity began to increase after the crypto market bottomed out, the Galaxy Research report said the number of new funds remains “stagnant,” while capital allocated to venture funds declined. The report adds that diminished allocator interest also contributed to VCs raising smaller funds, with the median and average fund sizes in 2024 reaching their lowest levels since 2017.

Meanwhile, the report again named the U.S. as the number one destination for venture capital investment, accounting for 46.2% of all venture capital invested. However, the report notes that investment received by U.S.-headquartered crypto and blockchain startups was 17 percentage points lower than in the preceding quarter.

This drop consequently increased the share of all venture capital invested in countries and regions like Hong Kong and the U.K. Nevertheless, the report states there is an expectation that the share of the U.S. will rebound once Donald Trump takes over the White House.

The report also warns that the growing investment in spot-based bitcoin exchange-traded products (ETPs) could indicate that allocators are increasingly seeking exposure to the sector through large, liquid vehicles and not via early stage startups.

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