Crypto venture capital funding is projected to reach $18 billion in 2025, due to strong market fundamentals and favorable regulations. Investments will focus on Bitcoin Layer 2 solutions, blockchain infrastructure, AI blockchain, DeFi, Web3, privacy, and tokenization.
Robert Lay, the head of PitchBook, shared his expectations for crypto projects venture capital funding in 2025 in a recent interview with CNBC’s Crypto World. Although the year 2024 has been challenging, with a decrease in funding due to various reasons, such as the collapse of major players and higher interest rates, Lay remains optimistic about the industry’s future.
Reflecting on 2024, Lay said the year started strong with good funding, especially after approving a Bitcoin ETF. That renewed positive sentiment brought venture capital back into the space.
However, crypto investment momentum slowed as the year progressed. “Bitcoin kind of staggered a little bit, and there wasn’t a lot of activity, especially through the summer,” Lay said, adding that the 2024 venture capital amount will come in between $11 billion and $12 billion as projected, a 10 to 20 percent surge above the 2023 mark but still far less than what the world had hoped for going forward.
Crypto VC funding expected to grow in 2025
Lay turns his focus to 2025 and is optimistic because the fundamentals are strong for this crypto market. Bitcoin had already touched all-time high numbers, and a more liberalizing regulatory environment was popping out of the woodwork.
He also indicated that interest rates, although high, are likely to fall and thus further improve the investors’ outlook. “We’re expecting next year to be much stronger,” he stated, predicting that VC funding for crypto could rise to $18 billion or more in 2025, representing an increase compared to 2024. Although this figure would still fall short of the nearly $30 billion invested in 2021 and 2022, it signals a clear rebound in interest and investment.
The generalist investors have been relatively absent in recent years. Lay mentions that this group is back, and large financial institutions have a major role to play in this shift, along with close coordination with regulators to establish a more stable and credible environment for crypto.
As the involvement from these institutions builds, the levels of trust within crypto should increase, resulting in additional dollars transferred into the ecosystem.
When questioned on which areas crypto VC funding might focus on during 2025, Lay mentioned that, unlike during the last cycle, much attention was paid toward infrastructure and speculative sectors, including NFTs and Web3.
Focus on real-world apps predicted to rise
In contrast, during the following cycle, things may tilt toward applications. Lay noted that we expect to see more investments at the application layer. This means the focus will shift from infrastructure to real-world, user-friendly applications. Such applications could be in industries where crypto infrastructure decentralizes traditional systems, such as mobility or energy data.
Lay stressed that what’s lacking is more user-friendly platforms that allow people to get into crypto without having a deep understanding of the underlying technology. He compares it to the early internet days when infrastructure like AWS was set up, but the real value came when companies like Uber and Airbnb built on it. “In crypto, the real value will come from the applications, not just the infrastructure,” he said, pointing out the potential for real-world use and growth.
A project that received major attention in 2024 is the development of Bitcoin Layer 2 solutions, which may help scale Bitcoin and make it more useful for everyday applications. Although there was much excitement early in the year, that progress has slowed, and technical challenges have hindered the development of scalable solutions. The development has been slower than anticipated, and whether Bitcoin Layer 2 solutions will come up to the mark is yet to be seen.
Better regulations expected in 2025
When asked about the role of regulation in shaping the future of crypto, Lay acknowledged that though the regulatory environment remains a major concern, the situation has improved from previous years.
He believed that if no new legislation is approved in the United States for 2025, that is enough, just having less restrictive rules from the legislator side.
If more detailed legislation, such as a bill on stablecoin, enters into force, that will be a tremendous lift to the industry. “If Congress does nothing, I think that’s already a benefit compared to the last two years,” Lay concluded.
