Author: Mason Nystrom
Translation: Deep Tide TechFlow
Providing founders with some insights into the current state of cryptocurrency financing, as well as my personal predictions for the future of cryptocurrency VC.
To say in advance: the financing environment is tough due to upstream DPI (Deep Tide Note: a market capitalization-weighted index used to track the performance of decentralized finance (DeFi) assets in the cryptocurrency market) and LP funding challenges, across the entire VC space, the funds returned to LPs by the funds over the same period have decreased compared to the past.
This, in turn, leads to a reduction in net capital obtained by existing and new VCs, ultimately making the financing environment more challenging for founders.
What does this mean for cryptocurrency enterprises?
Trading will slow down in 2025, but will match the pace of capital deployment in 2024.
The slowdown in transaction numbers may be related to many VCs nearing the end of their funds, with less capital available for deployment.
Some large transactions are still completed by large funds, so the pace of capital deployment remains on par with the previous two years.
In the past two years, cryptocurrency M&A transactions have continued to improve, heralding good developments in liquidity and exit opportunities. Recent large M&A transactions, including NinjaTrader, Privy, Bridge, Deribit, HiddenRoad, etc., are good signs for the integration and underwriting of more crypto equity venture capital.
Over the past year, the number of transactions has remained relatively stable, with some larger, later-stage transactions completed (or announced) in the fourth quarter of 2024 and the first quarter of 2025.
This is mainly because more transactions belong to early Pre-seed, seed rounds, and accelerator stages, where funding is always relatively abundant.
Accelerators and Launchpads lead the number of transactions across stages
Since 2024, there has been a surge of accelerators and Launchpad platforms in the market, which may reflect a harsher capital environment and founders choosing to launch tokens earlier.
Median scale of early-stage transactions rebounds
The scale of Pre-seed financing continues to show year-on-year growth, indicating that the market still has adequate funding at the early stage. The median of seed round, Series A, and Series B financing has approached or rebounded to the levels of 2022.
Cryptocurrency VC Future Stage Predictions
1: Tokens Will Become the Primary Investment Mechanism
Transitioning from a dual structure of tokens and equity to a unified structure of single asset appreciation. One asset, one story of value appreciation.
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2: The Integration of Fintech and Cryptocurrency VC
Every fintech investor is transforming into a cryptocurrency investor as they seek to invest in the next generation of payment networks, new banks, and tokenized platforms, all built on the cryptocurrency track.
Competition among crypto VCs is about to arise, many crypto VCs that have yet to invest in stablecoins/payment sectors will find it difficult to compete with experienced fintech VCs.
3: The Rise of Liquidity Venture Capital
‘Liquidity Venture Capital’ - Venture capital opportunities in the liquidity token market.
Liquidity - The liquidity of public assets/tokens means faster liquidity.
Accessibility - Gaining access in private venture capital is not easy, while liquidity venture capital means that investors do not always need to win deals; they can directly purchase assets. Over-the-counter trading options are also available.
Position adjustment - As companies issue tokens earlier, this means that smaller funds can still build meaningful positions, while larger funds can similarly deploy into larger market cap liquid assets.
Capital allocation - many of the best-performing VCs historically have held their risk capital in tokens like BTC and ETH, which have generated excess returns. I personally believe that during bear market cycles, VCs will preemptively call upon more capital, becoming more normalized.
Cryptocurrency will continue to lead the forefront of VC
The integration of public and private capital markets is the direction of venture capital development, as companies delay going public, more traditional VCs choose to invest in liquidity markets (post-IPO holding instruments) or the secondary market. Cryptocurrency is at the forefront of venture capital.
Cryptocurrency continues to innovate in the formation of new capital markets. Moreover, as more assets move on-chain, more companies will focus on on-chain prioritized capital formation.
Finally, cryptocurrency returns tend to be more power-law driven than traditional venture capital (Deep Tide Note: in power-law distributions, the probability of most events is low, while the probability of a very few events is high.), top crypto assets are vying to become the underlying for sovereign digital currencies and the new financial economy. This decentralization will be greater, but the hyper-power-law and volatility of cryptocurrencies will continue to drive capital into the cryptocurrency venture capital space in search of asymmetric returns.
