Encryption Venture Capital 2025: New Trends Behind Financing Difficulties

Crypto Assets are leading venture capital into a new era of public-private integration and higher Liquidity.

Written by: Mason Nystrom

Compiled by: Deep Tide TechFlow

Provide insights to founders about the current status of Crypto Assets financing, as well as my personal predictions for the future of Crypto Assets VC.

To put it bluntly: the financing environment is tough, due to challenges with upstream DPI (Note: a market capitalization weighted index used to track the performance of decentralized finance (DeFi) assets in the crypto assets market) and LP funds. Throughout the VC field, the amount of funds returned to LPs by funds during the same period has decreased compared to the past.

This, in turn, leads to a reduction in net capital obtained by existing and new venture capitalists, ultimately making the fundraising environment more difficult for founders.

What Does This Mean for Crypto Businesses?

Trading slows in 2025, but matches the pace of capital deployment in 2024.

• The slowdown in trading volume may be related to many VCs approaching the end of their funds, with less capital available for deployment.

• Some large transactions are still completed by large funds, so the speed of capital deployment remains the same as in the previous two years.

In the past two years, mergers and acquisitions in the Crypto Assets sector have continued to improve, indicating a positive development in Liquidity and exit opportunities. Recent large-scale mergers and acquisitions, including NinjaTrader, Privy, Bridge, Deribit, and HiddenRoaad, signal a good sign for the integration and underwriting of more Crypto Assets equity risk investments.

In the past year, the number of transactions has remained relatively stable, with some larger transactions in the later stages expected to be completed (or announced) in the fourth quarter of 2024 and the first quarter of 2025.

This is mainly because more transactions belong to the early Pre-seed, seed round, and accelerator stages, where funding is always relatively abundant.

Accelerators and Launchpads Lead Trading Volume at Each Stage

Since 2024, there has been a surge of accelerators and Launchpad platforms in the market, which may reflect a more challenging capital environment and founders' choice to launch tokens earlier.

Early Stage Trading Volume Median Rebound

Pre-seed financing scale continues to grow year-on-year, indicating that the market still has ample funds in the early stages. The median financing for seed rounds, Series A, and Series B has approached or rebounded to the levels of 2022.

Crypto Assets VC Future Stage Predictions

1: Tokens will become the main investment mechanism.

Transitioning from a dual structure of tokens and equity to a unified structure of single asset appreciation. One asset, one value appreciation story.

2: The Integration of Fintech and Crypto VC

Every financial technology investor is transitioning into a crypto assets investor, as they seek to invest in the next generation of payment networks, new banking models, and tokenized platforms, all of which are built on the crypto assets infrastructure.

The competition among crypto VCs is about to arrive, and many crypto VCs that have yet to invest in the stablecoin/payment sector will find it difficult to compete with experienced fintech VCs.

3: The Rise of Liquidity Risk Investment

"Liquidity Risk Investment" — Investment opportunities in the liquidity token market.

Liquidity——The liquidity of public assets / tokens means faster liquidity.

Accessibility - In private venture capital, gaining access is not easy, while liquidity risk investment means that investors do not always need to win trades; they can directly purchase assets. Over-the-counter options are also available.

Position Adjustment - Due to the company's earlier issuance of tokens, this means that smaller funds can still establish meaningful positions, while larger funds can similarly deploy into larger market cap liquidity assets.

Capital Allocation - Many of the best-performing VCs have historically held their risk capital in tokens like BTC and ETH, which have generated excess returns. Personally, I believe that during bear market cycles, it will become more normal for VCs to call upon more funds in advance.

Crypto Assets will continue to lead the forefront of VC

The fusion of public and private capital markets is the development direction of venture capital. As companies delay their IPOs, more traditional VCs choose to invest in liquidity markets (post-IPO holding instruments) or the secondary market. Crypto Assets are at the forefront of venture capital.

Crypto Assets continue to innovate in the formation of new capital markets. As more assets are transferred on-chain, more companies will look towards on-chain priority capital formation.

Finally, the returns of Crypto Assets are often more power-law in nature than traditional venture capital (Note: In a power-law distribution, the probability of most events occurring is very low, while a very small number of events have a high probability of occurring.), with top Crypto Assets competing to become the underlying layer of sovereign digital currencies and the new financial economy. This decentralization will be greater, but the super power-law and volatility of Crypto Assets will continue to drive capital into the Crypto Assets venture capital space in search of asymmetric returns.