Crypto VC Activity Reaches $4.6 Billion in Q3: Second Strongest Quarter Since FTX Collapse

In the third quarter, venture capital investment in the cryptocurrency sector totaled $4.65 billion, marking the highest activity since the collapse of the FTX exchange in late 2022. This significant increase in investment reflects a 290% jump compared to the previous quarter. A small group of deals accounted for a large portion of this funding, with the US continuing to dominate venture activity in the crypto space.

Key Takeaways

Crypto venture capital investments hit $4.65 billion in Q3 2023, a 290% increase from Q2.
The quarter saw 414 deals, with seven major ones making up half of the total funds raised.
Established companies attracted most of the investment, while new startups had more deals but less funding.
A shift toward ETFs and digital asset treasuries may affect future VC investment in crypto.
The US led in both capital and deal volume, contrary to a challenging regulatory atmosphere.

Crypto VC activity hits $4.6B in Q3, second-best quarter since FTX collapse

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Crypto-focused venture capital investment reached a notable $4.65 billion in the third quarter, marking the second-highest level of activity since the FTX collapse, which severely impacted venture investments in cryptocurrency. According to Alex Thorn, head of research at Galaxy Digital, this represents a remarkable 290% increase from the previous quarter and is the largest quarterly total since the first quarter, which had $4.8 billion in investments.

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

This surge in investment comes during a previously quiet period for crypto venture capital, which has generally retreated from the market following the exposure of FTX’s significant fraud in November 2022, leading to the exchange's bankruptcy.

Concentration of Funding in Fewer Deals

In Q3, there were 414 venture deals, with just seven transactions accounting for half the total capital raised. Among these significant deals were:

Revolut: Received $1 billion
Kraken: Attracted $500 million
Erebor: A crypto-focused US bank secured $250 million

Notably, most of the capital raised in this quarter came from established firms launched in 2018, while the highest number of transactions was tied to companies founded in 2024. Thorn pointed out that pre-seed deals are becoming a smaller percentage as the crypto industry matures.

Venture Capital Stagnation Amid ETF Focus

While previous crypto bull runs in 2017 and 2021 showed a strong correlation between VC activity and liquid crypto asset prices, Thorn mentioned that the past two years have demonstrated a decline in such activity even as prices have risen.

In previous cycles, capital invested in cryptocurrency startups has followed the Bitcoin price. Source: Galaxy Digital

Factors contributing to this venture stagnation include a reduced interest in formerly popular sectors like gaming, NFTs, and Web3; competition from AI startups for investment; and higher interest rates that discourage venture allocators. Furthermore, spot exchange-traded products (ETPs) and digital asset treasury firms might compete for the same investor interest that typically flows into early-stage VC funding.

Thorn noted that prominent investments in spot-based Bitcoin ETPs by large institutional investors, such as pension funds and hedge funds, indicate that some may prefer exposure to the sector through these liquid investments rather than through initial VC engagements.

Related: VC Roundup: Crypto funding climbs to $13.6B in 2024, set to hit $18B in 2025

Nonetheless, macro trends continue to pose challenges for venture allocators, but Thorn anticipates potential changes in the regulatory landscape could reignite interest in the crypto space.

Strong Venture Activity in the US

In the latest quarter, 47% of capital invested went to companies based in the United States, which was considerably higher compared to 28% in the UK and 3.8% in Singapore. The US was also responsible for 40% of completed deals, with Singapore and the UK following at 7.3% and 6.8%, respectively.

The US has historically accounted for the most deals and capital invested, a trend that has continued into Q3 2025. Source: Galaxy Digital

Despite a challenging regulatory environment, Thorn stated that the US has traditionally dominated in terms of deal volume and capital invested, a trend he expects to persist under a potentially crypto-friendlier administration.

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