Original authors: E. Johansson, L. Kelly, DL News
Original translation: Tao Zhu, Jinse Finance
Venture capital is expected to make a strong comeback in 2025.
This is what venture capital firms and market observers said before the New Year.
What will drive the market up? How much are investors looking to invest?
Mike Giampapa, Galaxy Ventures general partner
Mike Giampapa, Galaxy Ventures general partner
With the establishment of the most pro-cryptocurrency administration and legislative bodies in U.S. history, it is hard to overstate the potential impact this could have on the cryptocurrency industry.
With a more favorable SEC, we expect enforcement actions to decrease, regulation to become clearer, and the likelihood of blockchain companies going public in the U.S. to increase.
We are also more optimistic than ever that banks will engage more openly in cryptocurrencies, introduce stablecoin legislation, and expand the broader cryptocurrency market infrastructure bill.
These measures will create the necessary transparency, guardrails, and protections for contractors and users across the industry.
In this context, the adoption of stablecoins and the use of underlying blockchains as financial rails are expected to accelerate in 2025.
Fintech companies—from newcomers to established firms, from consumer-facing businesses to B2B—will increasingly integrate with cryptocurrencies, providing customers with faster, cheaper, and more efficient financial services.
The application of stablecoins will continue to grow, extending beyond savings and payments to spending use cases. We expect merchant acquiring institutions and card networks to increasingly enable cryptocurrency payments at checkout, allowing users to use stablecoins as easily as fiat currency.
Alex Botte, Hack VC partner
By 2025, we expect venture capital in the cryptocurrency and blockchain sectors to rebound to previous highs.
Galaxy data shows that venture capital is still significantly lagging behind the peak in Q1 2022, when around 1,350 deals saw investments of approximately $12 billion.
In the third quarter, this figure was $2.4 billion, down 80%, involving 478 transactions (down 65%).
This gap is at least partially due to the ongoing lack of traditional venture capital and institutional investors, especially in the U.S.
Private markets, especially early-stage venture capital, often lag behind liquid markets, with major tokens like Bitcoin and Solana recently hitting all-time highs.
However, as market cycles mature and investor confidence rebounds, we expect venture capital to increase, potentially surpassing previous highs.
With the pro-cryptocurrency Trump administration and Congress in place, clarity in U.S. regulation has improved, potentially attracting more institutional participants than in previous cycles, and accelerating venture capital.
Robert Le, cryptocurrency analyst
Robert Le, Pitchbook cryptocurrency analyst
We predict that venture capital in the cryptocurrency space will recover in 2025, with total annual funding exceeding $18 billion and multiple quarters exceeding $5 billion.
This will mark a significant rebound with an average annual investment of $9.9 billion and a quarterly average of $2.5 billion during the 2023-2024 period.
Macroeconomic stability, institutional adoption, and the return of generalist venture capital could drive this trend.
Heavyweights like BlackRock and Goldman Sachs may increase their participation in cryptocurrencies, which in turn would enhance investor confidence and regulatory trust, paving the way for broader institutional involvement.
Their participation could drive mainstream adoption and attract asset management firms, hedge funds, and sovereign wealth funds into the cryptocurrency space.
Generalist venture capital returning after a period of retreat will shift its focus to showcasing startups with traditional metrics such as recurring revenue and measurable attractiveness.
This approach may facilitate a broader integration of cryptocurrencies with artificial intelligence, fintech, and traditional finance, emphasizing sustainable growth over speculative investments.
The improvement in global liquidity and declining interest rates will further facilitate venture capital, with rising token prices aligning with public and venture markets.
However, this optimistic scenario hinges on the stability of regulations (especially in the U.S.) and ongoing macroeconomic conditions.
Karl Martin Ahrend, Areta founding partner
Karl Martin Ahrend, Areta founding partner
In 2025, we expect a surge in M&A and IPO activity, highlighting the transformative shifts in the industry.
Traditional financial institutions are increasingly entering the space, seeking exposure to crypto projects with strong product-market fit. These companies often lack the expertise to build solutions in-house, driving a wave of collaboration and acquisitions.
Meanwhile, political tailwinds, including the potential for a more cryptocurrency-friendly U.S. Securities and Exchange Commission under new leadership, are fostering optimism for clearer regulation. This clarity, along with advancements in security, has bolstered investor confidence and paved the way for more public offerings and strategic deals.
Looking ahead, this intersection of institutional interests and favorable regulatory shifts could continue to drive M&A and IPO activity, shaping the future of the industry.