December 31, 2024
By Our Correspondent
Crypto venture capital funding is anticipated to reach $18 billion by 2025, driven by robust market fundamentals and supportive regulatory frameworks. Investment priorities will include Bitcoin Layer 2 solutions, blockchain infrastructure, artificial intelligence in blockchain, decentralized finance (DeFi), Web3, privacy enhancements, and tokenization.
In a recent interview with CNBC’s Crypto World, Robert Lay, the head of PitchBook, expressed his outlook for venture capital funding in crypto projects for 2025. Despite the challenges faced in 2024, characterized by a decline in funding due to factors such as the collapse of significant players and rising interest rates, Lay remains hopeful about the industry’s prospects.
Reflecting on the previous year, Lay noted that 2024 began positively with substantial funding, particularly following the approval of a Bitcoin ETF, which rejuvenated investor sentiment and attracted venture capital back into the sector.
However, as the year progressed, the momentum for crypto investments diminished. Lay remarked, “Bitcoin kind of staggered a little bit, and there wasn’t a lot of activity, especially through the summer.” He projected that the total venture capital for 2024 would range between $11 billion and $12 billion, representing a 10 to 20 percent increase over 2023, yet still falling short of the anticipated growth.
Looking ahead to 2025, Lay is optimistic, citing strong fundamentals within the crypto market. Bitcoin has already reached all-time highs, and a more favorable regulatory environment is emerging.
He also mentioned that while interest rates remain elevated, they are expected to decrease, which would enhance the outlook for investors. “We’re expecting next year to be much stronger,” he stated, forecasting that venture capital funding for crypto could exceed $18 billion in 2025, indicating a recovery in interest and investment, even though this figure would still be below the nearly $30 billion invested in 2021 and 2022.
Generalist investors have been notably absent in recent years. Lay indicates that this group is making a return, with significant contributions from large financial institutions playing a crucial role in this transition. Close collaboration with regulators is essential to create a more stable and credible environment for cryptocurrency.
As the participation of these institutions increases, it is anticipated that trust within the crypto space will also grow, leading to a greater influx of capital into the ecosystem.
When asked about potential areas of focus for crypto venture capital funding in 2025, Lay pointed out that, unlike the previous cycle, there is likely to be a greater emphasis on applications rather than just infrastructure and speculative sectors like NFTs and Web3.
The emphasis is expected to shift towards real-world applications. Lay highlighted that investments will increasingly target the application layer, moving away from infrastructure to user-friendly solutions. These applications could disrupt traditional systems in sectors such as mobility and energy data through decentralized crypto infrastructure.
Lay emphasized the need for more accessible platforms that enable individuals to engage with cryptocurrency without requiring extensive knowledge of the underlying technology. He likened this to the early days of the internet, where foundational infrastructure like AWS was established, but the true value emerged when companies such as Uber and Airbnb leveraged it. “In crypto, the real value will come from the applications, not just the infrastructure,” he remarked, underscoring the potential for practical use and expansion.
A notable development in 2024 was the progress of Bitcoin Layer 2 solutions, which have the potential to significantly improve Bitcoin’s scalability and its applicability in everyday transactions.
Anticipated Regulatory Improvements in 2025
In a discussion regarding the influence of regulation on the future of cryptocurrency, Lay recognized that while the regulatory landscape continues to be a significant concern, it has shown improvement compared to prior years.
He expressed the view that the absence of new legislation in the United States for 2025 would be sufficient, as long as the existing regulations become less restrictive.
Should more comprehensive legislation, such as a stablecoin bill, be enacted, it would provide a substantial boost to the industry. “If Congress remains inactive, I believe that would already represent an advantage over the previous two years,” Lay concluded.
