Crypto VC Funding Set to Surge: PitchBook Predicts $18B Investment in 2025

PitchBook analyst Robert Le forecasts a major rebound in crypto venture capital (VC) funding, predicting a surge to $18 billion or more in 2025, marking a 50% increase compared to 2024. While this growth is promising, it still falls short of the approximately $30 billion invested in 2021 and 2022.

2023 and 2024: A Challenging Journey

The crypto sector has faced significant hurdles in recent years. Le described 2023 as a particularly tough year, with the collapse of FTX, the erosion of investor trust, and rising interest rates undermining market confidence. However, 2024 has shown signs of recovery. Early in the year, the approval of spot Bitcoin exchange-traded funds (ETFs) created positive momentum for the industry.

Despite a mid-year slowdown, Le projects that 2024 will end with between $11 billion and $12 billion in crypto VC funding—representing a modest 10% to 20% increase over 2023. This recovery signals optimism for the sector's future.

A Brighter Outlook for 2025: Key Drivers of Growth

Looking ahead to 2025, Le is optimistic that crypto VC funding will soar to new heights, driven by several key factors:

• 1. Return of Generalist Investors: Traditional investors outside the crypto sector are beginning to show renewed interest. This could lead to large-scale investments and a broader market recovery.

• 2. Crypto-Native Funds With Dry Powder: Crypto-focused investment firms have substantial capital on hand, but they require the involvement of generalist investors to fully scale their operations.

• 3. Role of Financial Institutions: Le notes that major financial institutions will play an essential role in driving growth, leveraging their trusted relationships with regulators to foster a more stable and favorable environment for crypto investments.

• 4. Regulatory Clarity: A more predictable and stable regulatory environment, particularly in the U.S., would bolster investor confidence. While Le remains cautious about potential changes, the mere absence of new, restrictive regulations would represent an improvement over the regulatory uncertainty of recent years.

Shifting Focus: From Infrastructure to Applications

Le also anticipates a shift in the types of crypto projects that attract investment. While infrastructure-based ventures dominated the early years of the crypto boom, the focus is now shifting toward the development of decentralized applications (dApps) that cater to non-crypto users. These applications aim to provide better risk management and smoother user experiences, making crypto more accessible to the general public.

Le draws a parallel between crypto's infrastructure and the early stages of companies like Uber and Airbnb, which leveraged Amazon Web Services (AWS) to build their platforms. Just as AWS became a foundational tool for those companies, robust applications atop crypto infrastructure will be key to realizing the full potential of the sector.

The Benefit of 'Nothing': Optimism Despite Challenges

Le concludes with a note of cautious optimism about the U.S. regulatory landscape. He suggests that a shift in leadership at the U.S. Securities and Exchange Commission (SEC), potentially under the incoming Trump administration, could lead to fewer enforcement actions, which would be seen as a positive development. He also mentions the potential for legislative progress, such as new stablecoin bills or crypto-specific regulations, but acknowledges that such reforms are not guaranteed.

Ultimately, Le argues that even if regulators "do nothing" over the next few years, this could still be considered a win for the crypto industry, providing the stability needed to foster growth and innovation.

Looking Forward to 2025

With growing institutional involvement, clearer regulatory guidelines, and a shifting focus toward application-layer investments, 2025 promises to be a pivotal year for the crypto sector. If the current trajectory holds, the industry is poised to see a resurgence in VC funding and continued maturation of the technology.