Despite Crypto’s and Web3’s Potential, VC Funding Isn’t Flowing In

The crypto and Web3 industries are buzzing with excitement. With the recent U.S. presidential election bringing promises of reduced regulations, many in the crypto space are hopeful for a new era of growth. Bitcoin has surged past $100,000, and investors are celebrating what they believe to be a digital asset revolution. However, venture capitalists (VCs) aren’t rushing in just yet.

Despite the enthusiasm, funding for Web3 startups declined in Q4 2024. According to Crunchbase data, Web3 companies raised $1.8 billion in 267 deals, an 18% drop from $2.2 billion in 326 deals in Q3. While this is a 20% increase compared to Q4 2023, the overall number of deals has fallen significantly.

Looking at the full year, Web3 startups secured $8.5 billion across 1,545 deals. While this is similar to the $8.2 billion raised in 2023, deal volume declined by 26% from 2,085 deals the previous year. This shows that while funding amounts remain stable, investor interest in Web3 startups may be cooling.

Another sign of slowing momentum is the decline in large funding rounds. In the fourth quarter of 2024, just four deals exceeded $50 million, a decline from the nine recorded in the previous quarter. Some of the largest Web3 rounds in the quarter included:

  • Blockstream ($210M, October)-A blockchain infrastructure developer.
  • Public ($135M, December)-A fractional investing platform covering stocks, ETFs, crypto, and NFTs.
  • CryptocoinMiner ($100M, November)–A cryptocurrency cloud-mining company.

Interestingly, two of these rounds were among the five largest Web3 deals of 2024, showing that major investments are becoming less frequent.

This is a sharp contrast to the first half of 2024 when Web3 saw bigger investments. For example, in July, Infinite Reality, a company building 3D immersive environments, raised $350 million, making it one of the largest Web3 rounds of the year. In April, Monad Labs secured $225 million, the biggest Web3 round at the time.

Since late 2022, Web3 funding has been unpredictable, largely due to the collapse of FTX and a broader VC slowdown. However, the 2024 U.S. election brought renewed optimism. Former President Donald Trump returned to the White House, promising crypto-friendly policies.

In January 2025, Trump signed an executive order on digital assets, looking into building a national digital asset stockpile and creating a working group for crypto regulations. Additionally, SEC Chair Gary Gensler, known for his strict approach to crypto regulation, announced his resignation.

These changes fueled excitement in the crypto market, with Bitcoin surpassing $100,000.  However, while traders celebrate, VCs remain cautious, waiting for clearer regulations and long-term stability.

Despite the current slowdown, crypto’s renewed momentum could attract more venture capital in the coming months. However, Web3 is not just about crypto—it also includes applications, protocols, and infrastructure technologies. Even if crypto funding surges, it may not lift the entire Web3 ecosystem.

For now, Web3 startups must prove their long-term value to investors. The industry is at a crossroads—while excitement is high, VC funding remains uncertain. If the enthusiasm around crypto translates into stronger investments, 2025 could be a turning point. However, for now, venture capitalists are staying cautious, waiting to see if this new wave of crypto optimism turns into real, sustained growth.

Web3 startups can also be helped by coming up with innovations that different companies like Horizon Fintex find valuable in their operations. This utility could attract a lot more investment since there will be a verifiable record of how the innovations are helping to solve real-world problems.

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