Bitcoin Hits ATH, But VCs Are Bailing – What’s Going On?!

For Better or For Worse Venture capitalists are key contributors to the growth of the crypto industry the only problem is they don't seem to be paying much attention in fact the absence of VC investment could be a part of the reason why the crypto Market has sometimes felt a bit meh recently so then what the heck is going on well thankfully a recent report sheds some light on the answer so today we'll break this report down for you in simple terms and tell you where crypto could be headed next let's dig in so the report

we'll be breaking down for you today is titled crypto and blockchain venture capital for Q3 2024 it comes from Galaxy a leading blockchain company with a focus on VCS we'll leave a link to the full report for you down in the description but we'll be giving you the juiciest bits here in this video now the report starts by analyzing the number of deals made between VCS and crypto startups and the amount of capital being invested the reports authors highlight that there was $2.4 billion being invested by VCS in Q3 which is actually a 20% drop

from Q2 there were also 478 deals made a drop of 177% when you think about it though this decline does make sense after all BTC hit its all-time high in March but it's been chopping sideways until recently not to mention that most of crypto's activity lately has been in mem coins it's easy to see why these mixed messages could leave VC's feeling a bit hesitant this is likely why despite bitcoin's Almighty rally earlier this year Venture Capital interest in crypto is about as low as it was in 2023 what shocking to see is just how

much the correlation between btc's price and the amount of VC investment into crypto startups has eroded if you look at the chart provided you can clearly see this correlation as BTC starts to move more to the upside more and more VCS begin to catch on and start throwing their Mega Buck out the crypto industry you'll also noticed that VC money tends to stick around a little while after bitcoin's all-time high and that's because they'll have rotated this Capital into altcoins like the rest of us however ever since btc's price pivoted to the upside in January

last year VC's don't seem to have noticed there was a small uptick when BTC hit its peak in March but frankly it's barely worth noticing this is kind of strange when you think about what happened in 2023 and in 2024 I mean sure last year usdc scared us all for a second and there were more hacks and exploits than we could shake a stick at but ethereum got a major upgrade and we saw the birth of major blockchains like Bas and mantle to name but a few as for this year Bitcoin has finally got spot

ETFs in the US a new alltime high and more political consideration than ever before so then what gives is it because nfts have gone quiet maybe we need more jpegs of perplexed gorillas to keep our VC friends interested anyhow the authors of the report explain the real reason or at least part of it essentially it all comes down to bitcoin stealing the overall narrative if you ignore meme coins and a handful of alt layer ones that is as a result BTC has outperformed pretty much every narrative that dominated the last cycle everything from defi to

nfts to gaming has been left in the dust if the authors are right on this then what this means is that VCS are likely waiting for the next big narrative before laying down their enormous stacks of cash and if you want to beat them to the punch you'll need to determine which narratives will be the next big thing of course figuring that out is easier said than done thankfully though we have a few videos about this both here on the main Channel and over on our recently rebranded second Channel more coin Bureau we'll leave a

few links in the description for you to check out after this video and by the way if you're enjoying this video so far go ahead and give that like button a tap it really helps us out and if you'd like to see more content like this subscribe to the channel and turn on those notifications so you don't miss our next one hello hello it's me guys cousin Barry I'm very very sorry to be interrupting this no doubt fascinating video but I want to tell you about the coin Bureau deals page so listen up and listen

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you these promos and discounts so you're welcome thank you very much go and another look pronto we have to come and have a word all right okay in the next part of the report the authors look at how much money VC's invest based on what stage a project is at they highlight that in Q3 this year 85% of venture capital went to early stage projects and the remaining 15% went to later stage projects they also point out that there might still be some dry powder kicking about from the last cycle and that many project leaders

will still have the resources needed to Source New Deals while it isn't mentioned in the report something interesting can be seen in the chart provided as you can hopefully see the orange part of the bars on the chart represent investment in early stage project and the purple part represents the investments in later stage project but what you'll notice is that since Q2 last year the purple bit is shrinking and the orange bit is growing now this could be suggesting that those VCS who've weathered the storm with us have been on the lookout for for the

next big thing and the shift towards early stage projects suggests they might have found it when it comes to the deals being made the focus here is on projects that are in their precede fundraising stage that's simply because these will most likely be the projects that bring the most Innovation and could potentially reshape the space as the authors put it quote the share of preed deals declin slightly though remains healthy relative to Prior Cycles again though you can see on the chart provided that the amount of preed deals has seen an optic since Q2 which

makes you wonder if this could be the start of something much bigger but well maybe we're just being optimistic now the authors then look at the valuations of VCB cryptos and this is where things don't look so optimistic that's because valuations dropped in a big way throughout 2023 which makes sense when you remember that the market was so dry last year that it often felt like a desert by Q4 of 2023 VCB crypto valuations had hit their lowest levels since Q4 of 2020 however the reports authors also point out that valuations and deal sizes have

bounced back a bit since Q2 of this year which aligns with btc's all-time high back in March since then valuations have hit similar levels to what we saw in 2022 what's interesting though is that VC funding going into crypto appears to be Cor correlated with VC funding on a broader scale and the fact that crypto has rebounded more sharply suggests that VCS are shifting more of their focus towards the crypto industry now the next part of the report looks at which crypto categories received the most VC funding in Q3 unsurprisingly the largest portion went to

what galaxy labels as quote trading exchange investing and lending with over $460 million of VC funds now we say unsurprisingly because this basically means centralized exchanges which continue to generate incredible amounts of trading revenue and continue growing regardless of which cryptos are pumping so long as something's pumping they're making money on that note layer one cryptos came in a close second place with just under $450 million and in third place was pretty much all of the leading narratives from the last cycle those being web 3 nfts Dows metaverse and gaming this bracket got around $350

million in VC funding although it's worth keeping in mind that it's the only bracket with a bunch of unrelated narratives all bundled together now this could be to Simply highlight the investment in last Cycle's Big Winners or it could be to make the numbers look good for any VCS reading this report recall that Galaxy is a leading platform for VC investors after all skepticism aside though the authors then provide a chart that shows the share of VC Capital flowing into each crypto category but honestly this chart is a bit of an eyesa I mean it

kind of looks like those sand art kits you'd buy for your niece or nephew's birthday specifically to annoy their parents thankfully though the authors explain what's going on here they write that since Q2 AI Services have seen a 5x growth in crypto VC funding that's an insane difference in just a few months and suggests that VCS are ready to jump on the AI hype say did you see Elon musk's recent unveiling of Tesla's Optimus robots probably nothing meanwhile VC investment in that trading exchange investing and lending bracket has grown by 50% along with layer ones

meanwhile the last Cycle's Big Winners have actually seen a 39% reduction which is notably more than any other category they came they saw they conquered they faded the authors go on to say that layer ones got the largest investment share in Q3 at 13% totaling $341 million crypto exchanges got the second highest share at $265 million and infrastructure projects came in third with $258 million however when it comes to deal counts this paints a slightly different picture last Cycle's winners had 120 deals in Q3 which accounts for 25% of the total deals made making it

the Leader by quite a wide margin what's crazy though is that this is a whopping 30% increase since Q2 recall that last Cycle's winners were web 3 nfts Dows metaverse and gaming could this be foreshadowing a boom in these crypto sectors well if you've been keeping up with the hype of games like Off the Grid then you'll know this could very well be the case full disclosure by the way coin Bureau is invested in Off the Grid but the point still stands anyway infrastructure projects came in second place in terms of deals made with 79

deals or 16% of the share an increase of 12% since Q2 trading Exchange investing and lending platforms came in third place with 55 deals or 11% of the total meanwhile crypto projects focusing on media and education had the largest decrease in deals at a staggering 73% ouch the authors then give us another lovely bit of sand art and thankfully provides some context underneath they explained that in Q3 crypto infrastructure had 64 deals made gaming had 48 and defi had 38 next they break down the investment made by stage and category in their words quote this

gives a clearer picture of what types of companies in each category are raising funds essentially layer one cryptos Enterprise blockchains which are basically blockchains built to streamline real world businesses and defi projects saw the most early stage investment whereas crypto mining businesses got their investment at a later stage okay the next part of the report looks at investment by geographic location unsurprisingly the largest number of V deals took place in the US with a whopping 43% of the Total Singapore trailed far behind in second place with just 8% of the deal share followed by the

UK with 6% the UAE with 3% and Switzerland with 3% the US also had the Lion Share of VC investment amount at 56% whereas the UK had 11% Singapore had 7% and Hong Kong had 4% what's intriguing is that most Venture Capital funding went to towards projects founded in 2021 but most VC deals took place with projects launched in 2022 now this could simply be because VCS were throwing their money into projects amidst the Mania of the 2021 Bull Run and opted for token allocation deals when the market cooled off the following year although admittedly

this is just speculation on our part and in the final part of the report the authors took a look at Venture fundraising which as they explain continues to be a sticking point they say that the reasons why VCS haven't been as involved in crypto as they were in the previous two years is for several reasons both macro and crypto specific on a macro level the authors explained that crypto investors have been expecting interest rates to fall since the start of the year but as you'll know this only recently materialized the authors also say that the

past two years in crypto have basically been a bit of a turnoff and to be fair it ain't hard to see why what's worse though is that according according to the authors quote 2024 is shaping up to be the weakest year for Crypt VC fundraising since 2020 as you can see from the chart provided this puts us way off where we were in the last bull market and as if that wasn't scary enough the average fund size in Q3 this year has reached its lowest level since 2017 all right and with that we've reached the

end of Galaxy's report and we'll remind you that we've left a link to it in the description if you want to take a peek at it yourself so then this leaves just one all important question what does all of this mean for crypto well something that stands out is just how much dominance the US has maintained over the rest of the world in terms of venture capital interest this is despite the fact that the regulatory backdrop in the US makes it difficult for crypto projects to even start there this is why many entrepreneurs have started

moving overseas launching their projects in more crypto-friendly countries like Switzerland the UAE or Singapore to name but a few what this means is that while the US is still dominating by a wide margin time is running out us Regulators will need to act quickly and carefully if they want to prevent more of this Innovation from moving overseas by that we mean that they need to start providing more regulatory Clarity something that only seems possible if there are serious changes to the status quo anyway aside from the overwhelming VC interest in the US the other standout

is that Venture capitalists just don't seem to be engaged for reasons we've discussed throughout this video this obviously paints a rather Bleak picture in the short term because VCS have played such a key role in the growth of the crypto industry but as you'll know it's not just VCS that have been missing at the other end of the spectrum are retail investors who have yet to return on mass but this is why despite the bearish nature of this report we see all this as as bullish it sounds crazy until you realize that just like retail

investors Venture Capital investors will return at some point and best of all this could happen sooner than you might think take a second to consider that a lot of the recent activity in crypto has been with mem coins as you can imagine mem coins are virtually impossible for VCS to engage with due to their inherent risks but now that the memin hype may be fading some VCS could begin feeling comfortable enough to follow the next narrative which won't have the same level of risk hopefully anyway at that point people will start to take notice particularly

retail investors who have been on the fence it'll only be a matter of time until the fomo kicks in and Retail investors start pushing crypto to new all-time highs the good news is that just by sticking around you've already positioned yourself to take full advantage so give yourselves a pat on the back folks your patience and belief in crypto means that you've success y front run trillions of dollars worth of investment okay and that just about wraps up today's video so if you enjoyed it you know what to do hit those like subscribe and notification

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