Galaxy Digital Says ‘Barbell Market’ Caused Crypto Funding to Drop 20% in Q3
Galaxy Digital’s Latest Report
According to data from Galaxy Digital, venture capitalists invested about $2.5 billion in various crypto projects during the third quarter. This figure represents a 20% drop from the previous quarter when investors injected $3.12 billion.
Galaxy Digital’s research analysts Gabe Parker and Alex Thorn also noted a decline in deals over the last quarter. Only 476 deals were made between July and September, representing a 17% decrease from the second quarter.
However, the $2.5 billion venture capital is a 20.4% increase from the approximately $2 billion invested in crypto projects in the third quarter of last year.
Reason Behind Decrease in Funding Revealed
So, what caused the decline in crypto funding? According to Thorn and Parker, a ‘barbell market,’ which saw Bitcoin-related products and meme coins take center stage, made investors overlook mid-tier crypto projects. They argue that the minimal interest in utility tokens during Q3 kept many venture capitalists away from the markets.
The two also said that increased demand for Ethereum spot ETFs in the coming months may drive venture capitalists away from Web3 and decentralized finance even further. Compared to Bitcoin ETFs, interest in Ethereum ETFs, which track the performance of ETH, has been minimal, with Galaxy Digital reporting total net inflows of $26 million in the past 24 hours.
Meanwhile, the digital asset investment company has reported that projects in their early stages received the most funding (85%) in the third quarter. Venture capitalists who raised funds for these projects were crypto trading firms, exchanges, and developers of layer-1 blockchains.
Further, projects that integrate artificial intelligence technology also raised significant capital, with investors like Sahara AI, Sentient, and Ceti contributing $43 million, $85 million, and $60 million, respectively.
American Projects Attracted More Venture Capitalists Than Others, Galaxy Digital Reports
US-based crypto companies accounted for 206 of the 476 deals and took in roughly 57% of the total venture capital. Projects based in the United Kingdom and Singapore got 8.6% and 6.7% of the $2.5 billion, respectively.
Galaxy Digital expects venture capital funding to accelerate in the first quarter of 2025 due to reduced Fed interest rates and a conducive regulatory environment.
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