In the third quarter of 2024, crypto venture capital funding fell by 20%, attributed to a 'barbell market' where Bitcoin and high-risk memecoins dominated, leaving mid-tier projects seeking investment overlooked, according to Galaxy Digital.

Analysis of Funding Decline

According to the Galaxy Digital report, there was a 20% decrease in crypto venture capital funding in Q3 2024, down to $2.4 billion. The number of deals also fell by 17%, totaling 478 transactions. However, the $2.4 billion marks a 21.5% increase from the nearly $2 billion seen in the third quarter of 2023.

Market Influencing Factors

Galaxy Digital experts attribute this decline to a 'barbell market,' where Bitcoin and memecoins captured most investor attention. The high demand for spot Bitcoin ETFs may have diverted large investors from early-stage crypto VC investing. Meanwhile, demand for spot Ether ETFs remains minimal.

Future Prospects

Galaxy Digital also suggests the market could see a revival in Q4 2024 and Q1 2025 as interest rates fall and regulatory environments possibly ease. In Q3, 85% of capital was channeled into startups in crypto exchanges, trading firms, and companies working on layer 1 blockchains. Successful beneficiaries included companies integrating artificial intelligence.

Future crypto funding may accelerate due to potential regulatory changes and rate cuts. The influence of the 'barbell market' persists, but the outlook remains uncertain.