Crypto VC Funding to Rebound in 2025, JPMorgan Says - But No 2021 Boom

The cryptocurrency venture capital (VC) market is expected to see a resurgence in 2025, but it likely won't reach the dizzying heights of the 2021-2022 boom, according to a new report from JPMorgan. While improved regulatory clarity in the U.S. and Europe is a positive sign, analysts point to several factors that could dampen the enthusiasm, including increased competition from traditional financial giants and a shift towards community-driven fundraising.

Big Finance Muscles In: How BlackRock and Others are Changing the Game

The entrance of major financial institutions like BlackRock and Franklin Templeton into the crypto space is a double-edged sword for VCs. As these institutions expand their presence in areas like stablecoins, tokenization, and decentralized finance (DeFi), they could potentially squeeze out smaller players and limit the market share available for venture capital investments. BlackRock's recent expansion of its tokenized money market fund to multiple blockchains, for instance, could reduce opportunities for new stablecoin projects.

Community vs. VCs: A New Era of Fundraising

Another trend impacting the VC landscape is the rise of community-driven fundraising platforms like Echo. Crypto projects are increasingly wary of large token sales to VCs, fearing a loss of control and potential regulatory scrutiny. This shift could make it more challenging for traditional VCs to secure deals with promising startups.

High Interest Rates and ETFs: Further Challenges for Crypto VCs

High interest rates are also playing a role, making venture capital a less attractive option compared to other investments and thus limiting the overall flow of capital into the crypto sector. Additionally, the growing popularity of crypto ETFs is diverting some investor attention away from early-stage startups, as ETFs offer a simpler way to gain crypto exposure.

The Future of Crypto VC: A Focus on Fundamentals

Despite these challenges, JPMorgan analysts expect crypto VCs to adapt. They predict a greater emphasis on projects with tangible user adoption and a focus on long-term growth, rather than short-term metrics like total value locked (TVL) and tokenomics. "This trend highlights an increasing focus on the foundational elements of blockchain technology, prioritizing projects that enhance scalability, security and efficiency," the analysts wrote.