Surge in Crypto VC Funding: $4.65B in Q3, Second Highest Since FTX Tumble

Crypto venture capital funding experienced a significant resurgence in the third quarter of this year, reaching an impressive $4.65 billion. This figure represents the second-highest level observed since the collapse of FTX, which shook the industry late in 2022.

Key Takeaways:

Crypto venture capital funding surged by 290% in Q3, totaling $4.65 billion, marking the strongest performance since early 2023.
Investment largely flowed into stablecoins, artificial intelligence (AI), and blockchain infrastructure, with seven deals constituting half of all investments.
Pre-seed funding continues to decline as investors prefer established companies and are moving towards liquid assets like Bitcoin Exchange-Traded Products (ETPs).

This sharp increase reflects a 290% rise from Q2 and indicates the most robust quarter since the $4.8 billion recorded in Q1, based on the latest data from Galaxy Digital.

According to Alex Thorn, head of research at Galaxy, this rebound demonstrates that investor interest in digital-asset startups is stronger than many anticipated, despite overall activity still falling short of the explosive growth seen during the 2021-2022 bull market.

Crypto VC Funding Surges to $4.65B in Q3, Second-Highest Since FTX

Key Investment Trends: AI and Stablecoins Continue to Attract Capital

Stablecoins, AI-enhanced crypto tools, blockchain infrastructure, and trading technologies have continued to draw significant investment throughout the quarter while early-stage investment remained consistent.

This wave of investment follows a nearly two-year period marked by reduced activity across the crypto sector. Venture capital firms significantly reduced their investments after FTX's multi-billion-dollar fraud scandal, which undermined confidence and stalled deal-making across various sectors.

Despite the substantial increase in figures, the distribution of capital was highly concentrated. Of the 414 venture deals struck this quarter, just seven were responsible for half of the total investments made.

The fundraising landscape was dominated by a few major players, including Revolut, which led with a sizeable $1 billion round. Kraken followed closely, securing $500 million, and Erebor, a U.S.-based crypto bank, raised $250 million.

Established firms, particularly those launched around 2018, captured most of the funding. However, newer companies that began operations in 2024 represented the highest number of deals, indicating a robust interest in early-stage ventures, even amid a maturing market.

Thorn noted that the share of pre-seed funding has been on a consistent decline in recent years. As more traditional financial institutions venture into the crypto space and existing venture-backed companies find their market fit, he indicated that "the golden era of pre-seed crypto venture investing has likely passed."

Unlike previous bullish trends, the current market cycle has not been accompanied by a similar surge in venture financing. Thorn suggests this stagnation could be due to waning interest in previously popular areas such as NFTs, Web3 gaming, and consumer crypto applications, compounded by intense competition from AI startups that dominate the venture scene.

Additionally, rising interest rates have deterred venture capital allocators broadly. Concurrently, institutional investors seem to be shifting their focus toward spot Bitcoin ETPs and digital asset treasury strategies, opting for liquid, regulated products rather than committing to early-stage investments.

Nevertheless, Thorn remains hopeful that regulatory changes, particularly clearer frameworks in the U.S., could help restore investor confidence.

The United States continued to be the main hub for crypto VC activity in Q3, accounting for 47% of the invested capital and 40% of completed deals. The UK followed with 28% of the capital, while Singapore made up 3.8%.

In spite of previous regulatory challenges, Thorn predicts that U.S. dominance will likely grow, especially under the crypto-friendly Trump administration. "We expect U.S. dominance to increase, particularly now that the GENIUS Act has been enacted and if Congress can pass a crypto market structure bill," he stated.