Total venture funding for crypto startups fell by 20% in the third quarter compared to April-June, amounting to $2.4 billion, according to Galaxy Digital.
Compared to the same period last year, the figure rose by 21.5%. The reduction in funding was accompanied by a 17% decrease in the number of deals, down to 478.
“The stagnation is explained by the focus on Bitcoin with ETFs and the minor activity from meme coins, which […] have questionable ‘stability’,” the review states.
This led to “minimal interest” from major players and a “sluggish” market throughout the year.
Currently, a typical investor’s portfolio consists of high-cap coins like Bitcoin, Ethereum, and speculative meme coins. Meanwhile, “second-tier” tokens and projects, which often seek venture funding, are overlooked, experts noted.
Galaxy Digital emphasized that this trend has led to a “disruption” of the long-standing correlation between the price dynamics of digital gold and the funds raised by startups.
Experts warned that the situation could be cemented by the growing popularity of Ethereum ETFs, which remains “minimal”. This would further deter venture investors from DeFi and Web3.
In the third quarter, the largest share of funding went to early stages— 85% of the total amount, indicating the long-term health of the entire ecosystem.
The majority was accumulated by teams from exchanges, trading companies, and developers of L1. Startups integrating AI increased their raised funds fivefold compared to the previous quarter.
Among the largest investment rounds were Sentient ($85 million), CeTi ($60 million), and Sahara AI ($43 million).
Crypto firms from the US received 56% of venture funding, followed by Singapore and the UK at 8.7% and 6.8% respectively. The top five is rounded out by the UAE and Switzerland.
Analysts forecast an increase in investments in crypto startups over the next two quarters due to lower interest rates and the potential for more lenient regulation.
Earlier, experts from Pitchbook noted the resilience of DePIN to bear markets due to strong fundamentals and applications across various industries.
For more on how the sector operates and why it has attracted particular attention from investors, read ForkLog’s material: