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

In 2024, the encryption market experienced significant growth. The market capitalization of liquid cryptocurrencies reached $3.4 trillion by the end of the year, an 88% increase year-on-year. The market capitalization of Bitcoin grew by nearly $1 trillion, accounting for 62% of the total market increase. The boom in Memecoins and AI tokens also contributed to the market, particularly performing well in activities on the Solana chain.

Despite the market recovery, the encryption venture capital sector still faces challenges. Major trends such as Bitcoin, memecoins, and AI agent tokens offer limited venture capital opportunities. Sectors like DeFi, gaming, metaverse, and NFTs have failed to attract significant new attention or capital. Infrastructure companies face increasing competition from traditional financial 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. Macroeconomic pressures have hindered high-risk allocations, significantly impacting the encryption venture capital industry. After the collapse of the encryption market in 2022, comprehensive VC firms have mostly maintained a cautious stance.

In the fourth quarter of 2024, venture capital invested $3.5 billion in encryption and blockchain startups, a quarter-on-quarter increase of 46%. The total investment for the year was $11.5 billion, with a total of 2,153 transactions. It is expected that by 2025, the annual investment amount will exceed $18 billion, but it will still be below the levels of 2021-2022.

The institutionalization of Bitcoin, the rise of stablecoins, and the regulatory progress of DeFi-TradFi integration are key areas of innovation for the future. These factors, combined with emerging trends, are expected to promote a revival in venture capital activity.

capital investment and Bitcoin price

Historically, there has been a strong correlation between Bitcoin prices and investments in encryption startups. However, since January 2023, this correlation has noticeably weakened. Bitcoin has reached new highs, while venture capital activity has struggled to keep pace.

Possible reasons include:

• Diminished interest in configuration: Institutional investors hesitate due to regulatory uncertainty and market volatility.
• Market narrative shift: The current narrative favors Bitcoin, potentially overshadowing other encryption investment opportunities.
• The overall sluggishness of the venture capital market has affected encryption investments.

Infrastructure sector dominates encryption venture capital

In 2024, the infrastructure sector attracted over 610 transactions, totaling $5.5 billion, a year-on-year increase of 57%. Investment focuses on expanding blockchain networks through L2 solutions to improve speed, reduce costs, and enhance scalability. Modular technology has received significant 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. Corporate blockchain financing dropped significantly by 69%, to $164 million.

Web3 financing has shown resilience, raising $3.3 billion in the past two years. Emerging trends such as SocialFi, encryption AI, and DePIN have driven growth. DePIN has become a rapidly growing area, attracting over 260 deals and nearly $1 billion in financing.

DeFi is experiencing a strong recovery in 2024, achieving over 530 financings, a year-on-year growth of 85%. Bitcoin-based DeFi use cases are the key driving force.

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%, significantly rising from 15% in the third quarter.

Most Active Investors

In 2024, Animoca Brands led 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 more than 50; Polychain Capital and Amber Group maintained over 40 investment activities.

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

encryption risk financing

In 2024, venture capital fundraising has dropped to its lowest level in six years, with 865 funds totaling $104.7 billion, a decrease of 18% compared to 2023. The encryption venture capital financing is under pressure, and allocators have reduced their commitments. Although a rate cut is expected in 2024, meaningful cuts are not anticipated until the second half of the year.

In 2024, fundraising for encryption venture capital funds showed weakness, with 79 new funds raising $5.1 billion, the lowest annual total since 2020. The median and average fund sizes have fallen to their lowest levels since 2017, highlighting a challenging fundraising environment.

shift to medium-sized funds

Historically, small funds (under $100 million) have dominated the encryption venture capital space, reflecting the early characteristics of the industry. Since 2018, there has been a significant shift in the trend of medium-sized funds ($100 million to $500 million). Large funds (over $1 billion) grew rapidly from 2019 to 2022, but did not appear in 2023-2024, due to reasons including deployment difficulties and valuation risks.

Well-known funds such as Pantera Capital and Standard Crypto remain active, expanding their business scope to areas like AI. Pantera Fund V plans to raise funds for the first time in July 2025, with a target of $1 billion.

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, 10,000 transactions per second, 1 second block time.
2. Farcaster: A decentralized social network where users control their data.
3. Berachain: Proof of Liquidity (PoL) consensus, connecting network security and liquidity supply.
4. Story Protocol: Changing intellectual property management, supporting ERC-6551.
5. 0G Labs: Combining blockchain scalability with AI-driven processes.
6. Polymarket: A decentralized prediction market that will attract attention during the 2024 U.S. elections.
7. EigenLayer: Introduces a re-staking market to optimize Ethereum staking assets.
8. Babylon: A blockchain that combines Bitcoin's Proof of Work with Proof of Stake.
9. Sentient: Utilizing blockchain networks for AI computation.
10. Zama: Homomorphic encryption for secure data processing on the blockchain.

Key trends for 2024 and beyond

AI integration, Bitcoin DeFi, and dedicated blockchains are becoming dominant trends. 0G Labs and Sentient are leading in the AI field, while Babylon strengthens the role of Bitcoin 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 of mid-sized funds and the dominance of emerging funds indicate industry maturity. Despite a short-term decline in venture capital and extended fundraising cycles, the focus on early-stage investments and new trends such as AI integration show that the ecosystem is resilient and prepared for future growth.