Deng Chao, the CEO of HashKey Capital, an institutional asset manager, recently stated in an interview with Cointelegraph that venture capitalists (VCs) will be more attracted to crypto projects by 2025. These VCs are specifically interested in stablecoin products, real-world asset (RWA) tokenization, artificial intelligence, and infrastructure.
Chao believes that the rising valuations of digital assets in 2024, coupled with the re-election of Donald Trump as the President of the United States, will lead to an increase in VC capital flowing into crypto projects. Chao stated, “As we enter a supportive macro environment driven by stimulative US policies and the formalization of crypto regulatory frameworks, these macro tailwinds are expected to drive more VC investments in 2025.”
However, despite the optimistic outlook, Chao cautioned that macro risks, such as geopolitical tensions or increased deficit spending, could result in increased price volatility and uncertainty in the coming year.
Chao also mentioned that stablecoins have proven to be the most successful use case for cryptocurrencies in 2024. VCs are increasingly focusing on the usage of stablecoins in emerging market economies. Dollar-pegged stablecoins, which are real-world tokenized assets, are being used as a store of value by individuals in countries with rapidly depreciating local fiat currencies or strict capital controls.
Dollar-pegged stablecoins offer advantages such as lower fees, near-instant finality times, and the absence of a bank account requirement, making them a viable method of providing banking services to the unbanked population. According to the World Bank, approximately 1.4 billion people lack access to adequate banking services, primarily due to insufficient infrastructure in developing countries. However, this problem can be addressed through the use of smartphones with internet access and crypto wallets.
The real-world asset tokenization sector, which includes government securities, stocks, corporate bonds, stablecoins, collectibles, or any other asset tokenized on a blockchain ledger, is projected to reach a value of up to $30 trillion by 2030.
While VC investment in crypto projects is expected to increase in 2025, it is unlikely to reach the peak levels seen during the 2021 bull market. Market analyst Infinity Hedge predicts that crypto VC investment in 2025 will surpass the levels of the previous year but will fall short of the peak recorded in 2021. In 2024, crypto companies raised approximately $13.6 billion, compared to $10.1 billion in 2023. According to market data platform PitchBook, VC investments in crypto projects are projected to grow to $18 billion in 2025.
A recent report from Galaxy Digital also forecasts a 50% year-over-year growth in VC investments in crypto projects in 2025, but it predicts that these investments will not reach the highs established in 2021-2022.