Cryptocurrency VC reached $4.6 billion in Q3, the second-best quarter since the FTX collapse.

Venture capital (VC) focused on cryptocurrency reached 4.65 billion USD in Q3, recording the second-highest activity level since the collapse of the FTX exchange at the end of 2022, which severely undermined confidence in crypto venture capital investments.

According to the latest report by Alex Thorn, Head of Research at Galaxy Digital, venture capital investment in Q3 has increased by up to 290% compared to the previous quarter and is the highest level since Q1 of this year, when it recorded a figure of 4.8 billion USD.

“Although we have not yet returned to the vibrant period of the bull market in 2021-2022, venture capital activity in the cryptocurrency sector remains positive and stable. Areas such as stablecoins, artificial intelligence (AI), blockchain infrastructure, and exchanges continue to attract capital flows and large deals, while pre-seed ( investment activity remains stable,” Thorn commented.

![VC cryptocurrency reached $4.6 billion in Q3, the second-best quarter since the FTX collapse])https://img-cdn.gateio.im/webp-social/moments-773f9c1effcde172a9f59f9c82bda4ed.webp(Venture capital funding for blockchain-focused startups has reached its second-highest level this year | Source: Galaxy DigitalThe increase in investment comes amid a period of stagnation in the cryptocurrency venture capital market, as most funds have withdrawn following the large-scale fraud scandal of FTX in November 2022, resulting in the collapse and bankruptcy of the exchange.

The number of transactions is small but the value is high

In Q3, the market recorded a total of 414 venture capital deals, however, only seven deals accounted for half of the total capital raised in the quarter. Notable deals include the fintech company Revolut with 1 billion USD, the exchange Kraken with 500 million USD, and the cryptocurrency bank Erebor in the US with 250 million USD.

Businesses established since 2018 account for the majority of the raised capital, while newly established companies in 2024 lead in the number of transactions. Mr. Thorn stated: “The rate of pre-seed transactions has been continuously decreasing as the industry matures.”

“With the increasing acceptance of cryptocurrency by traditional financial institutions, along with many startups finding their footing in the market, the golden era of venture capital in the seed stage of cryptocurrency may have passed.”

Venture capital stalls as cryptocurrency ETF funds become the focus

Previous price increases in 2017 and 2021 showed a strong correlation between venture capital activity and the prices of liquid cryptocurrency assets. However, in the past two years, venture capital activity has cooled down despite the continued growth in cryptocurrency prices.

![VC cryptocurrency reached 4.6 billion USD in Q3, the second best quarter since the FTX collapse. ])https://img-cdn.gateio.im/webp-social/moments-752b19865dfcda2b938998e003f8efe1.webp(In previous cycles, investment in cryptocurrency startups closely followed Bitcoin's price. Source: Galaxy DigitalThorn explains: “This stagnation is due to many factors, including a decline in interest in previously hot sectors such as gaming, NFT, Web3; fierce competition from AI startups to attract investment; and high interest rates causing venture capitalists to be more cautious.”

In addition, the trading products of the exchange )ETP( based on spot Bitcoin and digital asset management companies are also competing fiercely for investment capital in cryptocurrencies. Large investments in spot Bitcoin ETPs from pension funds and hedge funds indicate that some large investors tend to approach this sector through major, high-liquidity financial products rather than investing in early-stage startups.

Macroeconomic factors continue to pose challenges for capital allocators, but Thorn forecasts that changes in the regulatory environment could open up recovery opportunities for investment flows into the cryptocurrency sector.

The US leads in cryptocurrency venture capital investment

In the third quarter, 47% of total investment capital was poured into companies based in the USA, compared to 28% in the UK and 3.8% in Singapore. The USA also accounted for 40% of total deals, followed by Singapore with 7.3% and the UK with 6.8%.

![VC cryptocurrency reached 4.6 billion USD in Q3, the second-best quarter since the FTX collapse. ])https://img-cdn.gateio.im/webp-social/moments-716f56cef29996c2420d1dc2b4f3e645.webp(The United States has always accounted for the largest proportion of transactions and investment capital, and this trend is expected to continue until Q3 2025 | Source: Galaxy DigitalThorn noted that, despite the regulatory environment in the U.S. not being particularly favorable in the past, the country still maintains its leading position in terms of the number of deals and total investment capital. He expects this trend to continue under the cryptocurrency-friendly Trump administration.

“We forecast that the US will strengthen its leading position, especially when the GENIUS Act has been passed, and if Congress can enact legislation on the structure of the crypto market, this will encourage traditional financial institutions in the US to engage more actively in this field.”

Mr. Giáo