Crypto funding falls 20% in Q3 amid Bitcoin-led market
Venture capital funding in the crypto sector declined by 20% to $2.4 billion in the third quarter of 2024, driven by a market trend focused on Bitcoin (CRYPTO:BTC) and speculative memecoins, according to a report by Galaxy Digital.
The “barbell market” phenomenon, where attention is concentrated on large-cap assets like Bitcoin and high-risk memecoins, has caused mid-tier projects to struggle for funding.
The report, authored by Galaxy’s head of research, Alex Thorn, and analyst Gabe Parker, highlighted that while Bitcoin and its new ETFs have taken center stage, there has been marginal new activity around memecoins, which tend to be high-risk and short-lived.
This trend has led to "minimal interest" from large institutional investors, keeping the overall market sentiment relatively subdued throughout 2024.
A typical barbell portfolio consists of safer investments in well-established assets like Bitcoin and Ether (CRYPTO:ETH), alongside speculative tokens, bypassing smaller utility tokens.
This has created a funding environment where mid-sized projects face neglect, as explained by the report.
Galaxy noted that institutional interest in spot Bitcoin ETFs from pension funds and hedge funds might have contributed to the decline in early-stage crypto VC investments, leading to a breakdown in the usual correlation between Bitcoin’s price and VC funding.
The quarter saw a shift in capital allocation, with 85% of funds directed towards early-stage deals.
Most funding went to crypto exchanges, trading firms, and companies developing layer 1 blockchains.
Interest in crypto firms integrating AI services surged, with funding for companies like Sentient, CeTi, and Sahara AI seeing a five-fold increase quarter-on-quarter.
Geographically, U.S.-based firms secured 56% of the total VC funding, with Singapore and the United Kingdom following at 8.7% and 6.8%, respectively.
Despite the slowdown, Galaxy suggests that funding could pick up in Q4 and early 2025, as potential regulatory easing and lower interest rates may encourage renewed investor activity.
At the time of writing, the Bitcoin (BTC) price was $67,510.76.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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