Opportunities and Challenges in the Crypto Market as Seen by Top VCs Before 2025

As the New Year's bell is about to ring, the encryption industry is迎来新的发展节点. In 2024, the market has experienced recovery, innovation, and adjustment, with leading projects continuously consolidating their positions and emerging tracks quietly rising. As a barometer of the industry, VC has not only witnessed market changes but is also shaping the industry's direction at the intersection of capital, community, and technology.

Standing at the starting point of 2025, we have invited several top VCs to share their observations and thoughts on the encryption industry. They reviewed the highlights of the past year, analyzed the current market opportunities and challenges, and made predictions about future trends. In this rapidly changing field, which projects and tracks are becoming the focus of VC attention? Let's explore the "yesterday, today, and tomorrow" of the encryption industry together.

The Most Impressive Projects of 2024

In the past year, the encryption industry has welcomed new growth driven by both market recovery and technological innovation. From infrastructure upgrades to breakthroughs in emerging tracks, many projects have demonstrated strong vitality and innovative potential.

The founder of a certain organization pointed out that Hyperliquid, as a high-performance perpetual contract DEX, has attracted a large number of users. Its token issuance did not involve VC or CEX listings, becoming one of the most successful airdrops in crypto history. The platform is expanding its product line and launching the HyperEVM ecosystem to increase the utility of the spot trading ecosystem. By earning substantial fees through on-chain clearing and market making, it is gradually encroaching on the market shares of leading DEXs and CEXs.

Another VC also highly praised Hyperliquid's market share, community airdrop and distribution mechanism, and wealth effect. He also mentioned that Pump.fun is the most successful Meme coin launch platform this year, successfully pushing the concept of "Meme launch platform" to the top narrative and igniting the Meme market boom. This indicates that Web3 projects can achieve success by building practical, high-experience, and compatible products.

In the DeFi space, the revival of mature lending protocols like AAVE and Compound, along with the emergence of high-quality newcomers such as Morpho, Euler, and Ajna, is exciting. Although DeFi has not received the same level of attention as in the past, the low-key success of these protocols is still worth noting.

Pudgy Penguin has been mentioned by several VCs. A founder of a certain organization believes that it has revitalized the entire NFT sector, showcasing the powerful energy of the new generation of entrepreneurs' integration of Web2 and Web3 thinking.

Ethena has performed remarkably in the DeFi space with the USDE stablecoin, profiting from high funding rates by establishing 1x long and short positions through CEX. Its collaboration with a certain fund ensures that USDE maintains stable returns even under negative funding rates, reinforcing long-term viability.

Bitcoin Market Outlook

Bitcoin has shown an astonishing growth momentum in 2024, with a cumulative increase of 119.1% as of December 31. This is primarily attributed to the adoption of spot ETFs by institutions, the halving event in April, and optimistic sentiment following the U.S. elections. Looking ahead to 2025, several VCs expect the bull market to continue, with a significant probability of breaking through $200,000.

Some VC indicates that as the market matures, the supply and demand relationship of Bitcoin will be further strengthened, and Bitcoin below $50,000 may become a thing of the past. Based on the technical indicators Pi Cycle and 2Y MA Multiplier, the Bitcoin peak may be around $200,000.

Some VCs are also cautious, predicting that the next peak may reach $120,000 to $150,000, followed by fluctuations between $100,000 and $150,000. Assuming the market value of gold remains unchanged, if Bitcoin's market value does not surpass its previous peak or is considered a growth asset, the price could reach $600,000, but it would take 5 to 10 years.

There are views that the current market dynamics will be profoundly influenced by multiple factors, especially the external liquidity brought by spot ETFs and the continuous capital inflow driven by future reserve policies. This means that from now until the peak next year, the Bitcoin market may not experience significant pullbacks but will instead maintain a trend of fluctuating upward.

The Dispute Between Meme and "VC Coin"

The controversy regarding "VC coins" has been an important topic over the past year. Some VCs have pointed out that when the scale of primary market VC funds exceeds 30 to 50 million US dollars, it becomes difficult for LPs to achieve excess returns. A compact scale is necessary to compel VCs to delve into the early stages and support entrepreneurs in need of help. Large-scale VC funds often fall into the trap of expanding management scale, participating in later rounds, and introducing the market-criticized "VC coins." This is actually an old problem for Web2 VCs, and in recent years, Web3 VCs have not been spared either.

The essence of the competition between Meme and VC coins is the competition for the existing market capital and liquidity. In an environment with limited new funds, VC coins struggle to maintain market support due to their low circulation, high FDV characteristics, and the continuous emergence of new projects. The advantage of Meme coins lies in their full circulation and fair distribution, which aligns with the psychology of market investors.

However, the PVP nature of Meme coins is inherently unsustainable. Except for a few top projects, most find it difficult to have long-term value support. From an overall perspective, apart from BTC, ETH, and a very few DeFi infrastructure projects with stable income, most project tokens are of a PVP nature.

The VC currency dilemma currently has no good solution in the short term. Against the backdrop of tight liquidity and strengthened institutional advantages, the alleviation of the problem requires going through a complete bull-bear cycle, allowing the market to clear naturally and rebuild trust and fairness.

Future Potential Tracks and Projects

Looking to the future, new narratives driven by AI, DeSci, and other innovations are pushing the industry into a new phase. Leading ecosystems continue to solidify their moats, while emerging tracks and projects are also on the rise. Many institutions are optimistic about the following areas:

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 a single order of magnitude increase could potentially spawn multiple secondary assets similar to ONDO and USUAL.

2. Re-staking: As the grand narrative for 2024, the impact on coin prices has not yet fully manifested. With the gradual launch of AVS, a peak may be迎来 in 2025.

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

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

5. PayFi: Projects that bridge traditional finance and cryptocurrency (such as Layer 2 solutions and stablecoin issuers) may receive widespread attention.

6. The Integration of AI and Blockchain: The rise of decentralized AI infrastructure and AI agents is rapidly emerging, with projects poised to build related networks or applications.

"Mass Adoption" Breakthrough Outlook

Multiple VCs are optimistic about the progress of "mass adoption" next year. Some verticals, such as DePIN, have started to attract Web2 users. The payment sector is seen as an important direction for driving large-scale adoption.

Stablecoins demonstrate the power to surpass traditional banking efficiency in non-US dollar countries, providing multiple utilities for residents in third-world countries. Once a compliance framework is established, the potential in the payment sector is enormous, which could stimulate various innovative projects.

The new front-end user experience and embedded DeFi experience will also be key factors in driving adoption, making it easier for less experienced users to start using DeFi.

Bull Market Phase and Duration

We may currently be in the mid-stage of a bull market. The approval of Bitcoin ETFs means the emergence of more widely financialized derivative products, which directly reduces market price volatility as legitimate participants increase. In the future, it may be difficult to see a halving or a significant drop in the short term, and the market may shift from rapid bear and bull phases to a long-term slow bull.

Institutional and government interest in the encryption industry is increasing, and the Trump administration may promote a more friendly regulatory environment. The proposal for Bitcoin strategic reserves will further enhance market confidence.

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.

Retail Investor Recommendations

1. Focus on high certainty tracks, such as BTC, Meme coins, and AI narratives, and invest cautiously in old altcoins that lack support from new narratives.

2. Go with the flow, understand market trends, and keep up with the hotspots.

3. Pay attention to risk management, prepare funds that can withstand losses, and withdraw costs in a timely manner.

4. Avoid excessive use of leverage and maintain a prudent strategy.

5. Prioritize blue-chip assets such as Bitcoin and Ethereum, focusing on high-quality, sustainable projects.

6. Pay attention to security, use hardware wallets and trusted security tools.

7. Maintain a calm mindset, prioritize risk, and continuously learn and adapt to market changes.