Crypto-focused venture capital investment reached $4.65 billion in the third quarter, the second-highest amount of activity since crypto exchange FTX collapsed in late 2022 and decimated venture bets on crypto.
Galaxy Digital’s head of research, Alex Thorn, said in a report on Monday that Q3’s venture bets were a 290% quarter-on-quarter jump and the largest quarter since Q1, which saw $4.8 billion in investments.
“Despite remaining below 2021-2022 bull market levels, venture activity remains active and healthy overall. Sectors like stablecoins, AI, blockchain infrastructure, and trading continue to draw deals and dollars, and pre-seed activity remains consistent.”
Venture capital funding for blockchain-focused startups has reached the second-highest level of the year. Source: Galaxy Digital
The growing investment activity comes amid a lull period for crypto venture capital, which has largely pulled out of the industry following the uncovering of FTX’s massive fraud in November 2022, which led to the exchange’s collapse into bankruptcy.
Small number of deals attracted most funding
Q3 saw 414 venture deals, with seven accounting for half of the capital raised over the quarter.
Those included financial technology company Revolut, which attracted $1 billion, crypto exchange Kraken with $500 million and crypto-focused US bank Erebor with $250 million.
Meanwhile, established companies, those founded in 2018, accounted for most of the capital raised, while companies founded in 2024 accounted for the highest number of deals.
“Pre-seed deal count as a percentage has trended down consistently as the overall industry has matured,” Thorn said.
“With crypto being adopted by established traditional players, and a large cohort of venture-backed firms having found market fit, it’s increasingly likely that the golden era of pre-seed crypto venture investing has passed.”
VC capital stagnates as ETFs crypto treasuries take focus
Prior bull runs in 2017 and 2021 featured a high correlation between VC activity and liquid crypto asset prices, but Thorn said that for the last two years, activity has been more subdued while prices have risen.
In previous cycles, capital invested in cryptocurrency startups has followed the Bitcoin price. Source: Galaxy Digital
“The venture stagnation is due to a number of factors, such as waning interest in previously hot crypto VC sectors like gaming, NFTs, and Web3; competition from AI startups for investment capital; and higher interest rates, which disincentivize venture allocators broadly,” he added.
Spot exchange-traded products and digital asset treasury companies could be competing with investor interest in crypto.
High-profile investments in spot-based Bitcoin ETPs by large investors like pension funds and hedge funds suggest some “may be gaining exposure to the sector via these large, liquid vehicles rather than turning to early-stage VC investing,” Thorn said.
Related: VC Roundup: Crypto funding climbs to $13.6B in 2024, set to hit $18B in 2025
Macro trends also continue to present headwinds for allocators, but Thorn predicts shifts in the regulatory environment could bring a resurgence of allocator interest in the space.
US saw most crypto VC activity
During the quarter, 47% of the capital invested went to companies headquartered in the United States, compared to 28% in the United Kingdom and 3.8% in Singapore. The US also accounted for 40% of deals completed, followed by Singapore with 7.3%, and the UK with 6.8%.
The US has historically accounted for the most deals and capital invested, a trend that has continued into Q3 2025. Source: Galaxy Digital
Thorn said that despite a previously hostile regulatory environment, the US has historically accounted for the most deals and capital invested, and he expects that trend to continue under the crypto-friendly Trump Administration.
“We expect US dominance to increase, particularly now that the GENIUS Act is law and especially if Congress can pass a crypto market structure bill, which would further entice traditional US financial services firms to enter the space in earnest.”
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