Crypto venture capital (VC) activity remains below the levels seen in previous bull markets despite the recent rally in digital assets, Galaxy Digital (GLXY) said in research report on Wednesday.

Total capital allocated to VC funds in 2024 was $11.5 billion, less than in 2023.

Galaxy noted that VC activity was highly correlated to crypto asset prices in previous bull runs in 2017 and 2021, "but for the last two years activity has remained depressed while cryptos have rallied."

Stagnation in the venture capital market is due to a number of reasons.

These include a "barbell market" where bitcoin (BTC) and its new spot exchange-traded funds (ETFs) have taken centre stage, with "marginal net new activity" from memecoins, Galaxy said. These memecoins are hard to fund and have "questionable longevity."

There is growing enthusiasm for new projects at the intersection of artificial intelligence (AI) and crypto, the report said, and forthcoming regulatory changes may result in more opportunities in stablecoins, decentralized finance (DeFi) and tokenization.

Some large investors may be gaining exposure to crypto via spot bitcoin ETFs "rather than turning to early-stage VC investing," the report noted.

The U.S. was responsible for the most deals completed in Q4 and the most capital invested, Galaxy said.

Early-stage deals accounted for 60% of total investment in the fourth quarter, and stablecoin companies raised the most money, Galaxy added.

Venture capitalists put $11.5 billion in total into crypto and blockchain focused startups in 2024. These funds invested $3.5 billion, a 46% rise quarter-on-quarter, across 416 deals in Q4, the report added.

Read more: Crypto VC Market 'Tepid' as Q3 Investments Declined 20%, Says Galaxy Digital

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