Crypto venture capital funding is expected to surge, with PitchBook forecasting $18 billion in venture capital for 2025

PitchBook analyst Robert Le forecasts a significant rebound in cryptocurrency venture capital (VC) funding in 2025, predicting that the sector will attract $18 billion or more in VC investments. This would represent a 50% increase compared to the expected $11-12 billion in 2024. While this is still below the approximately $30 billion invested in 2021 and 2022, it signals a recovery after the challenges faced in 2023, such as the collapse of FTX, the erosion of investor trust, and the impact of higher interest rates.

Looking back at 2023 and 2024, Le described 2023 as a difficult year for crypto funding. The collapse of FTX had a significant negative impact on the market, eroding trust among investors and creating a more cautious environment. Additionally, higher interest rates made funding more expensive, which added to the difficulties. However, the start of 2024 saw a positive shift, with momentum generated by the approval of spot Bitcoin exchange-traded funds (ETFs). Despite a slowdown in the middle of the year, Le expects 2024 to finish with investments between $11 billion and $12 billion, representing a 10-20% increase over 2023.

For 2025, Le is optimistic about the future of crypto funding. Several factors contribute to this expectation. First, generalist investors are showing renewed interest in the crypto space, which could lead to larger investments from institutional players. Additionally, many crypto-native funds have significant “dry powder” (uninvested capital) but require participation from generalist investors to achieve substantial growth. Financial institutions are also expected to play a crucial role in supporting the sector, especially by leveraging their trusted relationships with regulators.

A key shift that Le anticipates is the focus on application-layer investments. While previous years saw a strong emphasis on infrastructure projects, Le expects the focus to shift toward decentralized applications (dApps) that target non-crypto users. These dApps would offer better risk management solutions and appeal to a broader audience outside the crypto community. Another key area for growth will be the application of crypto infrastructure in non-crypto sectors, such as mobility, energy data, and other industries, helping bridge the gap between traditional industries and blockchain technology. Le compares this shift to the way Amazon Web Services (AWS) provided the infrastructure for companies like Uber and Airbnb to scale and succeed.

Le also discussed the importance of regulatory clarity for the crypto industry’s future. He is cautiously optimistic about the regulatory environment in 2025, particularly with the potential for a change in leadership at the U.S. Securities and Exchange Commission (SEC) under the incoming Trump administration. This shift could result in fewer enforcement actions and a more favorable environment for crypto innovation. Additionally, the passage of legislative measures such as stablecoin bills or crypto-specific regulations would be beneficial for the industry. However, Le notes that even if there are no significant regulatory changes, simply having stability and predictability in the regulatory landscape would represent an improvement compared to the uncertainty of the past two years.

In conclusion, Le believes that a stable regulatory environment, combined with growing institutional involvement and a shift toward application-focused investments, could set the stage for significant advancements in the crypto sector in 2025. Even if the new administration and lawmakers take a “hands-off” approach or “do nothing,” Le argues that this would already represent an improvement over the recent period of regulatory uncertainty. The combination of these factors could drive the crypto market toward a stronger and more mature phase of development in the coming year.