Crypto-focused investment surged to $4.65 billion in Q3, representing the second highest level since the FTX collapse in late 2022. Notably, a significant portion of this capital, nearly half, was attributed to just seven venture deals. Revolut was the frontrunner, securing $1 billion in funding.

According to a report from Alex Thorn, head of research at Galaxy Digital, the third quarter marked a 290% increase compared to the previous quarter, making it the largest quarter since the $4.8 billion raised in Q1.

“Despite remaining below the investment peaks of 2021-2022, venture activity remains vibrant. Areas such as stablecoins, AI, blockchain infrastructure, and trading are continuing to attract both deals and investment. Pre-seed investment remains steady.”

Image of blockchain venture funding Venture capital funding for blockchain-focused startups has reached the second-highest level of the year. Source: Galaxy Digital.

Investment activity has picked up momentum post the FTX fraud revelation that caused a significant downturn in crypto capital investments.

Concentrated Funding in Limited Deals

A total of 414 venture deals occurred in Q3, with seven leading to half of the capital raised. Key players included Revolut ($1 billion), Kraken ($500 million), and Erebor Bank ($250 million).

Most of the capital was collected by established companies founded prior to 2018, although firms established in 2024 contributed to the largest number of deals.

“The percentage of pre-seed deals has been steadily decreasing as the industry matures.”

Trends in Venture Capital Activity

Thorn highlighted that prior surges in venture capital from 2017 and 2021 saw a close correlation between VC funding and crypto asset pricing. However, the last two years show subdued activity even as prices rebound.

Investment trends Historically, capital invested in cryptocurrency startups has mirrored Bitcoin prices. Source: Galaxy Digital.

“Current stagnation in venture capital funding stems from declining attraction for formerly hot sectors like gaming, NFTs, and Web3, alongside rising competition from AI startups, compounded by increased interest rates that dampen investment appetites.”

Looking forward, high-profile investments in Bitcoin ETPs suggest large institutional investors might prefer these liquid options over early-stage venture funding.

Thorn expects shifting regulations in the crypto space might rekindle interest from venture capital allocators.

US Dominance in VC Investment

In Q3, 47% of the total venture capital was funneled to companies in the United States, with only 28% directed to the United Kingdom and 3.8% to Singapore. The US also registered 40% of all deals, leading other nations.

“Despite regulatory challenges, the US will likely continue to excel in VC funding with favorable policies like the GENIUS Act and potential for future regulatory advancements aiding traditional financial entities to engage more significantly with the crypto ecosystem.”

Read more about future predictions and investment trends in the article.