As 2025 approaches, opportunities and challenges in the crypto market as seen by top VCs

As the bells of 2025 are about to ring, the encryption industry stands at a new development juncture. Over the past year, the market has experienced recovery, innovation, and adjustment, with leading projects consolidating their positions and emerging tracks quietly rising. As an industry barometer, VC has not only witnessed market changes but is also shaping the direction of the industry.

This article invites several top VCs to share their observations and thoughts on the encryption industry. They review the highlights of 2024, analyze the current opportunities and challenges, and make predictions about future trends. Let's explore the "Yesterday, Today, and Tomorrow" of the encryption industry from the VC perspective.

The Most Impressive Projects of 2024

With the market warming up and technological innovation driving it, many notable projects emerged in 2024.

The founder of a certain encryption investment company stated that Hyperliquid, as a high-performance perpetual contract DEX, has attracted a large number of users. The platform is expanding its product line, launching the HyperEVM ecosystem to increase the utility of the spot ecosystem. The platform earns substantial fees through on-chain liquidation and market making, gradually eating into the market share of leading DEXs and CEXs.

Another VC highly praised Hyperliquid, noting that its market share, community airdrops and distribution mechanism, and wealth effect are impressive. He also mentioned that Pump.fun is the most successful Meme coin launch platform this year, successfully pushing the "Meme launch platform" concept to the top narrative.

In the DeFi space, the revival of mature lending protocols like AAVE and Compound, as well as the emergence of high-quality newcomers such as Morpho, Euler, and Ajna, are also worth noting. Although DeFi does not attract as much attention in the current cycle as it once did, the understated success of these protocols is still worth tracking.

Pudgy Penguin is a project mentioned by multiple VCs and is considered to single-handedly drive the revival of the entire NFT track. Investors have indicated that as early investors and NFT holders, they have fully experienced the powerful energy of the founder's burst of Web2+Web3 integration thinking.

Ethena has performed exceptionally well in the DeFi space with the USDE stablecoin. By establishing 1x long and 1x short positions on CEX, it profits from high funding rates. Collaboration with a large asset management company fund ensures that even when funding rates are negative, USDE can maintain stable returns.

Bitcoin Market Trend Forecast

In 2024, the price of Bitcoin has increased by 119.1%, mainly benefiting from the adoption of spot ETFs by institutions, the halving event in April, and the optimistic sentiment following the U.S. elections. Looking ahead to 2025, several VCs believe that the bull market is likely to continue, and breaking through $200,000 is a high-probability event.

Some analysts use technical indicators like the Pi Cycle and 2Y MA Multiplier to determine the top, expecting Bitcoin to peak around $200,000. There are also VCs who hold a cautious attitude, predicting that the next phase peak may be between $120,000 and $150,000, followed by fluctuations between $100,000 and $150,000.

It is worth noting that the dynamics of the market in this round will be influenced by multiple factors, including the external liquidity brought by Bitcoin spot ETFs and the capital inflows driven by future reserve policies. This means that from now until the peak next year, the Bitcoin market may maintain a fluctuating upward trend, gradually moving towards higher price levels.

The Dispute Between Meme and "VC Coin"

The essence of the competition between Meme and VC coins is the competition for market capital and liquidity. In an environment with limited new capital, VC coins struggle to sustain market funding due to their low circulation and high FDV characteristics, along with the constant emergence of new projects. The full circulation and fair distribution mechanism of Meme coins resonates with retail investors' psychology, becoming a "new weapon" to counter institutional advantages.

However, the PVP attributes of Meme coins are essentially unsustainable. Except for a few top projects, most Meme coins struggle to have long-term value support. There is currently no good solution to the dilemma of VC coins in the short term. In the context of tight market liquidity and strengthened institutional investment advantages, the resolution of the problem requires going through a complete bull-bear cycle, allowing the market to naturally clear and reshaping trust and fairness.

Investors have pointed out that issuing tokens is not the end, but the real starting point for a project's operation. Project teams need to seriously consider issues such as application scenario implementation, stable cash flow, and active community. The "VC token project" needs to think more about Token Market Fit, allowing for broader community participation and distributing chips to strengthen interest binding.

Future Potential Tracks and Projects

Looking ahead to 2025, several tracks and projects are expected to stand out:

1. RWA (Real World Asset): Essentially, it allows blockchain to account for mainstream financial assets globally, with a current penetration rate of less than 0.1%. Even an increase by one order of magnitude could give rise to multiple new secondary assets.

2. Re-staking: As a major narrative for 2024, it may reach a climax in 2025.

3. ZK projects: such as RiscZero and hardware-accelerated Ingonyama, will gradually show market potential.

4. AI Agent: Expected to become the rising star of the crypto industry, showing potential in trading decisions, DeFi optimization, and asset management.

5. PayFi: An ecosystem capable of seamless, low-cost payments is entering a rapid development phase. Payment protocols that are deeply integrated with mainstream services and facilitate convenient conversion between cryptocurrencies and fiat currencies will become key.

6. The Integration of AI and Blockchain: Decentralized AI infrastructure and AI agents are rapidly emerging and are expected to become new highlights in the industry.

"Mass Adoption" Breakthrough

Many VCs believe that the payment track is likely to become the first breakthrough for blockchain "Mass Adoption". Stablecoins have demonstrated the ability to surpass traditional banking financial efficiency in non-US dollar countries, providing multiple utilities for residents of third-world countries. Once a compliance framework is established, this track has enormous potential.

From the perspective of ecological positioning and track selection, certain ecologies may have a leading advantage. New front-end user experiences and embedded DeFi experiences will also become key factors in driving adoption.

Bull Market Phase and Duration

Most VCs believe that we are currently in the mid-stage of a bull market. After the Bitcoin ETF is approved, the market may shift from past rapid bears and bulls to a long-term slow bull. There may be adjustments in the future, but it is unlikely to return to bear market levels.

In the short term, Bitcoin has at least completed half of the bull market process. From an optimistic perspective, Bitcoin, as a tool to combat inflation and protect wealth, still has a promising long-term outlook.

Retail Investor Recommendations

1. Focus on high certainty tracks, such as BTC, Meme coins, and AI narratives.
2. Invest cautiously in old altcoins that lack support from new narratives.
3. Go with the flow, understand market trends, and stay on top of the hotspots.
4. Reasonably control risks and avoid excessive use of leverage.
5. Prioritize risk management and use reliable security tools.
6. Focus on high-quality, sustainable projects rather than short-term trends.
7. Identify assets with long-term outstanding performance and avoid holding assets that lag behind the market.

In conclusion, the crypto market is moving towards a more mature and professional direction. Investors should maintain a steady and strong core, always prioritizing risk management.