VC funding for crypto startup companies continues to recover throughout the year, with an additional 16% increase in transaction volume, although overall value remains lower.
Funding for cryptocurrency projects has increased in 2024 in terms of total transactions. With the development of technologies, many projects have emerged as potential success stories. Competition has also intensified as the market becomes flooded with liquidity.
Investment profiles have also changed over the past year, reflecting a new narrative in the bull market. Based on Messari's report, L1 and infrastructure have recorded the largest transactions. Spending on DePin increased by 300% as projects offer new infrastructure and physical AI data centers or resource sharing. Artificial Intelligence (AI) is a rapidly growing field, doubling the flow of VC investment.
Although crypto prices and projects have recovered, some metrics show that VC funding remains under pressure from the downturn in 2022-2023. The biggest concern is whether funds will achieve favorable prices after launching their tokens.
Development teams have been more cautious about ownership and incentives to avoid repeating past mistakes, as some previously VC-backed tokens have recorded significant value declines post-launch.
The final quarter drives transactions in the year
Based on Messari's statistics on crypto transactions, the final months of 2024 contribute to overall success, with a monthly growth rate of 22.6%. Crypto funds ended Q3 with about $2.4 billion in transactions, with some months witnessing large-scale funding rounds. From October onwards, more transactions have been announced, offsetting the 'sluggishness' of the summer months.
The final quarter of 2024 is set to close with positive results, showing higher transaction volumes, recovering from slow growth in September. VC funding has returned to 2022 levels, prior to the prolonged downturn, with expectations that the market will be sufficiently liquid and an upward trend will occur in 2025.
One of the major drivers in 2024 is private transactions and funding rounds, often financed by bonds instead of crypto assets. Funds have become more selective in their spending, as some VC-backed projects struggle to trade their tokens.
The overall trend of increasing VC funding has also positioned Animoca Brands as a leader in supporting most projects. Animoca Brands also acts as a management unit, selecting promising projects with funding rounds ranging from $3 million to $10 million.
In addition to small funding rounds, projects have raised $7.07 billion in undisclosed funding rounds. These rounds exceeded both the number and value of seed rounds, as many investment funds have become more careful in selecting early-stage startup companies.
In 2024, the majority of funding comes from undisclosed large-scale funding rounds | Source: Cryptorank
Most funding is directed towards projects based in the United States. Crypto startup companies have several key funding sources, from major cryptocurrency investors and previous ICO projects to external buyers.
The increase in VC funding in the final months of 2024 coincides with a resurgence of ICO transactions. Like before, some projects combine public token sales with VC support. ICO transactions accelerated in 2024, totaling 555 transactions on Ethereum and 250 transactions on Solana. Meanwhile, Ethereum only saw 260 ICO transactions in 2023 during the market downturn, and Solana had negligible transaction numbers.
AI transactions lead the way
As of this point in the year, AI investments in mainstream startups have reached $87 billion, up from $56 billion in 2023, with prospects for further growth next year.
In the crypto space, the share of AI transactions has increased to 26.8% of total fundraising activities. AI projects continue to emerge, and some older startups are incorporating AI into their names. Overall, funding is pouring into the latest use cases for AI, from real infrastructure and decentralized computing to meme tokens and content production.
The AI investment portfolio is driven by VC funding but does not reflect in ICO rounds. Most ICO sales target DeFi, GameFi, infrastructure, and blockchain services. AI projects raise funds through funds or choose to launch meme tokens to leverage community benefits.
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