Pantera Partner: Why will the 2025 encryption VC landscape be different from previous cycles?

*Original Title: *The State of Crypto Venture Capital in 2025

Original Author: Paul Veradittakit, Partner at Pantera Capital

Original text compiled by: Luffy, Foresight News

Overview

· Since the beginning of this year, cryptocurrency companies have raised over $16 billion and completed more than 100 merger and acquisition deals. The industry is moving towards a record-breaking direction, with the total trading volume exceeding the entire level for the year 2024.

· Driven by more transparency in U.S. regulations and global growth momentum, the foundation of this cycle is more solid.

Strategic mergers and the IPO wave will continue into the next cycle.

In 2025, record-breaking M&A and IPO activities are reshaping and driving upgrades in the crypto industry, attracting new capital, institutions, developers, and users, injecting momentum into blockchain innovation and application implementation. This model has also appeared in other significant technological transformations: after decades of infrastructure development, there is often an explosive growth phase. The rise of artificial intelligence benefitted from decades of infrastructure investment, while the crypto industry is maturing at a much faster pace, relying on a more advanced tech stack and utilizing higher quality tools to achieve compound growth. For this reason, the intrinsic dynamics of the current market are drastically different from previous cycles: it is no longer dominated by speculative trading but is more reliant on strategic integration.

Accelerated Development Momentum: What Makes This Cycle Different?

The trends in the cryptocurrency market fluctuate like a sine wave. Although the growth rate in the venture capital sector has slowed down, factors such as favorable regulations, a government-friendly attitude towards cryptocurrencies, active trading flows, increased investment in crypto businesses by companies like Robinhood, and the deepening intersection and integration of crypto with adjacent fields have contributed to a bullish sentiment in the underlying activities of the industry.

After peaking in 2022, capital investment saw a significant decline in 2023, beginning to recover in 2024, and experiencing notable acceleration in 2025: just in the second quarter of 2025, there were 31 transactions exceeding 50 million USD, with later-stage financing such as IPOs, mergers and acquisitions, and debt financing becoming the main drivers of growth. From the beginning of the year to now, the capital attracted by the crypto market has reached 16.1 billion USD, but crypto venture capital is mimicking the model of traditional venture capital: capital is concentrating in a few funds. This concentration of capital often leads to an increase in the amount of individual investments but a decrease in the total number of transactions, reflecting that many crypto companies are gradually moving towards the growth stage, and also indicating that the current financing environment is more competitive than ever for both founders and investors.

Multiple factors are working together to make this cycle unique: the rebound in token prices, the continuous launch of new products, the founders' increased confidence in the industry, and regulatory benefits that clarify the development direction for stablecoins and digital assets, all of which have unlocked more capital for the industry. Over the past few years, regulatory ambiguity has created friction between innovators and the Web3 space, primarily due to concerns about potential punitive risks. The Trump administration's friendly stance towards the crypto industry, through the Genius Act and the Clarity Act, has laid the legislative foundation for on-chain applications. While we cannot determine the long-term impact of these bills, it is certain that these discussions and initiatives will reduce people's hesitation regarding crypto investments on cognitive and financial levels. Furthermore, the Federal Reserve is expected to cut interest rates in November, which is likely to drive more capital into risk assets, while the Digital Asset Trading System (DATS) will lock capital into long-tail assets. Investors' risk aversion is gradually weakening, and the enthusiasm for capital inflow is continuously rising.

Investment allocation is shifting: one-third of capital is flowing towards "bottom-up" opportunities, such as perpetual contracts, token issuance platforms, prediction markets, and new DeFi foundational protocols; the remaining two-thirds are focused on "top-down" areas, including DATS, tokenization of real-world assets (RWAs), exchange-traded funds (ETFs), and companies preparing for listing. In this cycle, public market assets dominate, allowing a broader audience to access crypto assets more easily. This is a very healthy signal for the industry. This balanced situation indicates that the market is gradually maturing, valuing both innovation and integration with traditional finance.

The window for formulating a blueprint for crypto legislation is very short, and the current government holds a supportive attitude towards the crypto industry; this window will last until the mid-term elections in 2026. The DeFi Education Fund is dedicated to protecting software developers: it has not only submitted feedback on the Senate Banking Committee's "Request for Information on Digital Asset Market Structure," but has also recently released a discussion draft of the "2025 Responsible Financial Innovation Act." The 2025 Wyoming Blockchain Summit held last week focused on digital asset regulation, emphasizing the urgency for the U.S. to establish a clear crypto regulatory framework, as well as the necessity of building a balanced market structure. Current government officials attended the summit, where the agenda included promoting forward-looking regulation. Looking ahead to the first quarter of 2026, we anticipate that the regulatory foundation will be stronger than in any previous cycle, especially in the context of time constraints.

Token Listing and IPO Market Reboot

In 2025, the number of token listings has decreased, and fewer new tokens are able to maintain price increases, which negatively impacts downstream trading flows. Projects that rely on token issuance will find it more difficult to secure financing if they lack market appeal.

In contrast, the IPO window has reopened. By 2025, 95 companies have gone public on U.S. exchanges, raising $15.6 billion as of mid-June, a 30% increase compared to 2024. Crypto-related companies like Circle and BitGo are leading the trend, giving rise to a new movement where investors are starting to allocate funds to crypto stocks rather than tokens. On June 5, 2025, Circle's listing became a key milestone: its issuance price was $31 per share, and by mid-July it had risen to $233, yielding a return of over 5 times, with a market capitalization of $44.98 billion. Recently, Figure and Bullish also completed their IPOs, with Bullish becoming the first company to raise $1.15 billion partially through stablecoins. BitGo plans to advance its IPO, having already raised $100 million during the bear market in 2023, highlighting investor interest. Today, crypto companies are focusing more on optimizing revenue and growth rather than pursuing speculative token issuance.

The surge in crypto IPOs and other "top-down" sectors is attracting traditional investors through robust, revenue-oriented business models (rather than the highly volatile cryptocurrencies). The IPO wave has only just begun, and more companies are expected to join in the coming months.

M&A activities and industry maturity

The year 2024 is set to be a record year for mergers and acquisitions, with over 100 deals totaling $1.73 billion; the number of deals in 2025 is expected to surpass that of 2024. From January to July of this year alone, 76 deals have been completed, totaling $6.23 billion, which is 3.6 times the total transaction amount for the entire year of 2024. At the current pace, the total number of M&A deals in 2025 is expected to reach 130.

The merger momentum in 2025 reflects more of the natural maturation signals of the industry rather than the release of pent-up demand. For example, strategic mergers like Robinhood's acquisition of Bitstamp indicate that mature companies are striving to build integrated platforms. Robinhood's multi-billion dollar bet on the future of crypto adds more credibility to the ecosystem. In the second quarter of 2025, Robinhood's crypto business revenue surged by 98% year-on-year, reaching $160 million; the company's total revenue grew by 45%, reaching $989 million, with profits of $386 million. As a stock trading platform focused on retail users, Robinhood's acceptance of blockchain infrastructure highlights the industry's trend toward mainstreaming and compliance-based infrastructure transformation.

Similarly, later-stage financing transactions also reflect a focus on "revenue-oriented, compliant models." For example, in the second quarter of 2025, Securitize raised $400 million from Mantle for RWA tokenization; the prediction market platform Kalshi raised $185 million, reaching a valuation of $2 billion. These initiatives indicate that the focus of the crypto industry has shifted towards collaboration with traditional financial institutions rather than merely chasing speculative opportunities.

The intersection and integration of the encryption industry with other fields

The cryptocurrency industry is no longer in isolation but is deeply integrating with today's cutting-edge technologies and the global financial system.

In the field of artificial intelligence, OpenMind's OM1 + FABRIC technology stack fills the "missing layer" in the robotics industry, enabling collaborative work among different robots through a decentralized approach; Worldcoin's iris scanning identity verification system relies on the blockchain identity layer, which is expected to allow AI agents to achieve autonomous certification and transactions, solving the key challenge of secure interaction for AI agents in the crypto space; decentralized AI platforms like Sahara AI (decentralized version of Scale AI) and Sentient (decentralized version of Hugging Face) are disrupting traditional AI infrastructure. Currently, the application layer of crypto AI is still in its infancy, but the potential it holds may give rise to a new market structure through on-chain agents and trading systems.

In the payment sector, stablecoins (especially Circle's USDC) have become an important component of the global payment system, and the "Genius Act" has further accelerated the adoption of USDC. In the first quarter of 2025, Circle's revenue grew by 58.6%, reaching $579 million. Analysts predict that the daily trading volume of stablecoins could reach $250 billion within the next three years; if the growth momentum continues, it may even surpass traditional payment systems like Visa in the next decade. Companies like PayPal and Visa are exploring the integration of stablecoins into mainstream payment channels. The collaboration between Robinhood and Arbitrum allows Robinhood users to directly trade USDC on Arbitrum, lowering the barrier for retail users to use stablecoins. This collaboration is just the beginning, as Arbitrum plays a key role in expanding the application of stablecoins, confirming the value of Layer 2 solutions in connecting cryptocurrencies with traditional finance.

The intersection and integration of these key industries bring together experts from the fields of artificial intelligence, fintech, and consumer technology, blurring the boundaries between industries. The cryptocurrency industry, as the infrastructure of decentralized systems, is gradually becoming a key layer in the global technology stack.

Looking to the future

We expect that from the fourth quarter of 2025 to the first quarter of 2026, the market cycle will be structurally stronger. Unprecedented regulatory clarity, anticipated interest rate cuts, and substantial capital inflows from strategic mergers and acquisitions and IPOs are collectively building a solid industry foundation. The current new momentum centered on "real application value" lays the groundwork for accelerated growth in the industry. Our strategy is to seize this opportunity and concentrate resources on making high-certainty investments in Series A companies that are expected to define their fields.

As of early 2025, the U.S. IPO market has seen 224 IPOs. The number of IPOs in the first half of 2024 was 94, while in the first half of 2025 it reached 165, an increase of 76%. In just the first half of 2025, there were 185 crypto-related merger and acquisition deals, which are expected to exceed the total of 248 for the entire year of 2024. The successful IPOs of well-known companies like Circle, along with traditional financial giants acquiring crypto firms, highlight the strength of the upcoming cycle.

The intersection and integration of cryptocurrency with artificial intelligence, payments, and infrastructure, combined with favorable regulations and strong investor interest, will drive the industry into an era of accelerated growth. Taking this opportunity, we will continue to solidify the position of the cryptocurrency industry as a global pillar of finance and technology.

Source: Foresight News