Venture capital activity in the cryptocurrency sector has remained stagnant for nearly two years, according to Michael Dempsey, managing partner at Compound. He notes that the industry has experienced a period of dormancy since 2024, contrasting sharply with the surge of entrepreneurial interest seen in 2021.
The primary driver behind this shift is the redirection of talent and capital toward artificial intelligence. Dempsey observes that tech founders are increasingly prioritizing AI development, which has pulled resources away from crypto projects. This trend reflects a broader movement of capital toward sectors perceived as having stronger fundamentals.
Compound, which manages over $200 million in assets, maintains a diversified portfolio including AI, machine learning, robotics, and biotech alongside crypto. Dempsey highlights that token incentives have struggled to ensure long-term alignment, contributing to the current challenges within the crypto venture landscape.
Despite the slowdown, Dempsey suggests that the current state of crypto venture capital indicates increased investor caution rather than the end of the sector. Compound continues to list cryptocurrency as one of its four core investment areas, investing from the seed stage through Series A.
