Original author: Mason Nystrom

Compiled by: White55, Mars Finance

Providing some insights for founders on the current state of cryptocurrency financing, as well as my personal predictions for the future of cryptocurrency VC.

That said, the funding environment is tough due to upstream DPI (Deep Tide Note: a market cap-weighted index used to track the performance of decentralized finance (DeFi) assets in the cryptocurrency market) and LP funding challenges. Across the entire VC landscape, funds are returning less capital to LPs over the same time period compared to the past.

This, in turn, leads to a reduction in net capital available to existing and new VC firms, ultimately making the financing environment more challenging for founders.

What does this mean for crypto companies?

Transaction slowdown in 2025, but in line with the pace of capital deployment in 2024.

· The slowdown in transaction volume may be related to many VCs nearing the end of their funds, with less capital available for deployment.

· Some large deals are still completed by large funds, so the pace of capital deployment remains consistent with the previous two years.

In the past two years, cryptocurrency merger and acquisition deals have continued to improve, signaling a positive development in liquidity and exit opportunities. Recent large-scale mergers and acquisitions, including NinjaTrader, Privy, Bridge, Deribit, and HiddenRoad, indicate a good sign for the integration and underwriting of more crypto equity venture capital.

Over the past year, the number of deals has remained relatively stable, with some larger, later-stage deals completed (or announced) in Q4 2024 and Q1 2025. This is mainly because more deals belong to the early Pre-seed, Seed, and Accelerator stages, which always have ample funding.

Accelerators and Launchpads leading the number of deals across stages.

Since 2024, there has been an emergence of numerous Accelerator and Launchpad platforms in the market, which may reflect a more stringent capital environment and founders choosing to launch tokens earlier.

The median transaction size in early-stage deals is recovering.

Pre-seed financing sizes continue to show year-on-year growth, indicating that the market still has ample funding in the early stages. Median financing for seed rounds, Series A, and Series B has approached or rebounded to 2022 levels.

Predictions for the future stage of crypto VC

1: Tokens will become the primary investment mechanism.

Shifting from a dual structure of tokens and equity to a unified structure of single asset appreciation. One asset, one value appreciation story.

Original tweet link: https://x.com/MorphoLabs/status/1930973177691189423

2: The integration of fintech and crypto VC.

Every fintech investor is transitioning into a cryptocurrency investor, as they seek to invest in the next generation of payment networks, new banks, and tokenized platforms, all built on cryptocurrency tracks. Competition in crypto VC is about to heat up, and many crypto VCs that have not yet invested 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 - In private venture capital, gaining access is not easy, whereas 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 adjustments - As companies release tokens earlier, this means smaller funds can still establish meaningful positions, while larger funds can similarly deploy into larger market cap liquid assets.

· Capital allocation - Many historically top-performing VCs have held their risk capital in tokens like BTC and ETH, which have generated excess returns. Personally, I believe that in bear market cycles, it will become more common for VCs to call upon more capital in advance.

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 are choosing to invest in liquidity markets (holding tools after IPO) or secondary markets. Cryptocurrency is at the forefront of venture capital. Cryptocurrency continues to innovate in forming new capital markets. Moreover, as more assets move on-chain, more companies will look to prioritize on-chain capital formation.

Lastly, the returns from cryptocurrencies are often more power law-like than traditional venture capital (Deep Tide Note: In power law distributions, most events have a low probability of occurrence, while a very small number of events have a high probability of occurrence.), with top crypto assets vying to become the underlying foundations of sovereign digital currencies and the new financial economy. This decentralization will be greater, but the super power law and volatility of cryptocurrencies will continue to drive capital into the cryptocurrency venture capital space in search of asymmetric returns.