2024 Cryptocurrency Venture Capital Landscape Review: Infrastructure Projects Active, Fundraising Weak

The cryptocurrency market experienced significant growth in 2024, with the market capitalization of liquid cryptocurrencies reaching $3.4 trillion by the end of the year, an 88% year-on-year increase. Bitcoin's market capitalization grew by nearly $1 trillion, approaching $2 trillion at the end of the year. The rise in Bitcoin accounted for 62% of the total market increase, and the surge in memecoins and AI tokens also played a boosting role.

Despite the market recovery, the encryption venture capital sector still faces challenges. The investment opportunities provided by major trends are limited, and the appeal of traditional hot sectors has declined. Emerging trends such as stablecoins, tokenization, DeFi-TradFi integration, and the intersection of encryption and AI show promise, but are still in the early stages. Macroeconomic pressures have hindered high-risk allocations, and comprehensive VC firms remain cautious.

In the fourth quarter of 2024, venture capitalists invested $3.5 billion in encryption startups, a quarter-on-quarter increase of 46%. The total investment for the year reached $11.5 billion, with 2,153 transactions. It is expected that the annual investment amount will exceed $18 billion in 2025. The increasing institutionalization of Bitcoin, the rise of stablecoins, and potential regulatory progress are key focuses for future innovation.

Capital Investment and Bitcoin Price

Since January 2023, the correlation between Bitcoin prices and encryption startup investment amounts has weakened. Possible reasons include: diminished allocation interest, a shift in market narratives, and a broader downturn in the venture capital market.

Infrastructure Track Dominance

In 2024, infrastructure-led encryption venture capital reached over 610 transactions totaling $5.5 billion, a year-on-year increase of 57%. The focus is on L2 solutions, modular technology, liquid staking, and developer tools.

NFT and gaming startups raised $2.5 billion, slightly higher than in 2023. Web3 funding shows resilience, with DePIN becoming a rapidly growing area. DeFi has experienced a strong recovery, with funding up 85% year-on-year, and Bitcoin-based DeFi use cases are a key driver.

The encryption industry is still highly concentrated in the early financing stage, accounting for 60% of capital investment. Later-stage financing accounts for 40%, which is a significant increase compared to the early stage.

Active Investors

The most active investment institutions in 2024 include Animoca Brands, OKX Ventures, Cogigent Ventures, and others. Active angel investors include Sandeep Nailwal, Paul Taylor, DCF God, and others.

Encryption Risk Financing

In 2024, venture capital fundraising fell to a six-year low, with 865 funds raising $10.47 billion, a year-on-year decrease of 18%. Encryption venture financing continues to face pressure from macroeconomic factors, with 79 new funds raising $5.1 billion, the lowest since 2020.

Medium-sized funds (100 million to 500 million USD) show a clear trend. Large funds (over 1 billion USD) have not emerged in 2023-2024 due to deployment difficulties and valuation risks. Paradigm Fund III has become the largest closed-end fund in 2024.

Investment to Watch in 2024

1. Monad: High-performance EVM-compatible L1 blockchain
2. Farcaster: Decentralized Social Network
3. Berachain: Innovative Liquidity Proof Consensus
4. Story Protocol: Reform of Intellectual Property Management
5. 0G Labs: Combining blockchain scalability with AI
6. Polymarket: Decentralized Prediction Market
7. EigenLayer: Ethereum Re-Staking Market
8. Babylon: Combines Bitcoin PoW and PoS
9. Sentient: Decentralized AI Application
10. Zama: Blockchain Security Data Processing

Future Trends

AI integration, Bitcoin DeFi, and dedicated blockchains will dominate the blockchain space. 0G Labs and Sentient are leading in the AI field, while Babylon strengthens Bitcoin's role in DeFi. Monad, Berachain, and Story Protocol are expected to launch their mainnets.

Conclusion

In 2024, there is a cautiously optimistic attitude towards encryption venture capital, with a rebound in funding activities and growing institutional interest. The shift of mid-sized funds and the dominance of emerging funds indicate industry maturity. Despite a short-term downturn, early investment focus and emerging trends highlight the resilience of the ecosystem, suggesting that new momentum may be about to emerge.