In a recent interview with CNBC, PitchBook analyst Robert Le made some bold predictions about the future of crypto venture capital (VC) funding. He expects that by 2025, the industry will see a significant boost in VC investments, with around $18 billion or more being poured into the sector. This represents a 50% increase from the previous year, but still falls short of the levels seen in 2021 and 2022 when around $30 billion was invested. Despite some challenges in 2023 and a slow start in 2024, Le remains optimistic about the future of crypto VC funding.
The year 2023 was marked by difficulties in the crypto funding space, with the collapse of FTX, erosion of trust, and higher interest rates affecting investor confidence. However, things started to pick up in 2024 with the approval of spot Bitcoin exchange-traded funds, leading to positive momentum in the industry. Despite a mid-year slowdown, Le predicts that total investments in 2024 will likely reach between $11 billion and $12 billion, representing a 10 to 20% increase from the previous year.
Looking ahead to 2025, Le sees several factors that will contribute to a stronger year for crypto VC funding. Generalist investors are showing renewed interest in the sector, hinting at potential large-scale investments. Crypto-native funds are sitting on significant dry powder, waiting for generalist participation to drive substantial growth. In addition, financial institutions are expected to play a key role by leveraging their trusted relationships with regulators to facilitate investment in the crypto space.
Le also anticipates a shift in focus towards application-layer investments in 2025, moving away from infrastructure projects. Decentralized applications (dApps) that target non-crypto users with better risk management and use cases that leverage crypto infrastructure for sectors such as mobility and energy data are expected to gain traction. The analogy of Amazon Web Services (AWS) serving as a base for companies like Uber and Airbnb underscores the importance of robust applications atop crypto infrastructure to unlock its full potential.
Regulatory clarity is another key factor that Le believes will drive growth in the crypto industry. He expresses cautious optimism about the U.S. regulatory environment in 2025, citing the potential for a shift in SEC leadership under the incoming Trump administration and the possibility of legislative progress on stablecoin bills or crypto-specific rules. Even if no new regulatory actions are taken, Le believes that a stable regulatory environment, combined with growing institutional involvement and application-focused investments, could pave the way for significant advancements in the crypto sector.
In conclusion, Le remains bullish on the future of crypto VC funding, predicting a stronger year in 2025 with increased investments and a shift towards application-layer investments. While challenges and uncertainties remain, particularly in the regulatory space, Le believes that a stable regulatory environment and continued institutional involvement could drive significant growth in the industry. The coming years are poised to be an exciting time for crypto as it continues to evolve and mature as an asset class.
