Crypto-focused venture capital firms are facing challenges in raising funds despite the bullish crypto markets, according to a report from Galaxy Digital Research. The report reveals that there were only eight new funds in Q3 of 2024, raising a combined $140 million, the lowest since Q3 of 2020. The decline in capital allocation to crypto VC has been ongoing since Q3 of 2023, attributed to events in 2022 and 2023 that caused investors to withdraw from the crypto sector. This trend may make 2024 the worst year for crypto VC fundraising since 2020. Existing VCs have also reduced their investments in crypto startups, with a 20% decline in value and a 17% fall in the number of deals in Q3 of 2024. The report highlights that the focus has shifted to Bitcoin and memecoins due to spot ETFs and the hot narratives from 2021. However, despite the decline in VC funding, investment in the decentralized finance sector has seen growth, while the Web3 sector experienced a decline. AI-focused crypto projects saw a significant increase in VC funding, demonstrating the interest in artificial intelligence in the crypto industry. Despite regulatory uncertainty, crypto startups in the US received the most funding from VCs.



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