The year 2025 marks the opportunities and challenges in the market as seen by encryption VC

As the New Year's bells are 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 consolidating their positions and emerging tracks rising. As an industry barometer, VC has not only witnessed market changes but is also shaping the direction of the industry.

Standing at the starting point of 2025, several top VCs shared their observations and thoughts on the encryption industry. They reviewed the highlights of the past year, analyzed current opportunities and challenges, and made predictions about future trends. Let us step into the VC perspective and explore the past, present, and future of the encryption industry.

Most Impressive Projects of 2024

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

The founder of a certain organization pointed out that Hyperliquid, as a high-performance perpetual contract DEX, attracts a large number of users while maintaining trading speed and liquidity. Its token airdrop has become one of the most successful cases in the history of encryption. The platform is expanding its product line, launching the HyperEVM ecosystem to increase the practicality of the spot ecosystem. By earning substantial fees through on-chain clearing and market making, it gradually eats into the market share of top DEXs and CEXs.

Another VC also highly praised Hyperliquid's market share, community airdrops and distribution mechanisms, and wealth effects. He also mentioned that Pump.fun is the most successful meme coin launch platform this year, bringing this concept to the top narrative and igniting a boom in the meme market. Web3 projects can achieve success by building practical, high-experience products that meet market demands.

In the field of DeFi, the revival of mature lending protocols like AAVE and Compound, along with high-quality new entrants such as Morpho, Euler, and Ajna, is exciting. Although DeFi has not received the same level of attention as before, the understated success of these protocols is still worth noting.

Pudgy Penguin has single-handedly revitalized the entire NFT track. As an early investor, I fully felt the energy of the founder's burst of Web2+Web3 integrated thinking, which strengthened the idea of "investing in the next generation."

Ethena has performed exceptionally well in DeFi with the USDE stablecoin, establishing 1x long and short positions through CEX to profit from high funding fees. Collaboration with BlackRock ensures stable returns even when funding fees are negative, reinforcing long-term viability.

Bitcoin Market Trend Prediction

Bitcoin is expected to increase by 119.1% in 2024, mainly benefiting from the adoption of spot ETFs by institutions, the halving event, and optimistic sentiment after the US elections. Looking ahead to 2025, the bull market is likely to continue, with a high probability of breaking through $200,000. As the market matures and supply-demand relationships strengthen, Bitcoin below $50,000 may become a thing of the past.

According to the technical indicators Pi Cycle and 2Y MA Multiplier, the Bitcoin top may be around 200,000 USD. These indicators have historically high reference value and can be used for top judgments and reduction decisions.

Cautiously predicting that Bitcoin's next peak may reach between $120,000 and $150,000, followed by fluctuations between $100,000 and $150,000. Based on Trump's remarks about Bitcoin as a strategic reserve, assuming a constant market value for gold, Bitcoin can be viewed as a growth asset before surpassing gold's market value, with a potential price of $600,000, but it would take 5 to 10 years.

Unlike in the past, this round of the market is influenced by multiple factors, such as the external liquidity brought by ETFs and the capital inflows driven by reserve policy. This means that Bitcoin may maintain a fluctuating upward trend, gradually moving towards higher price levels.

The Controversy Between Meme and "VC Coin"

The controversy over "VC Coin" has been an important topic over the past year. After the scale of first-level market VC funds exceeds 30 to 50 million USD, it becomes difficult for LPs to achieve excess returns. Only a compact scale can force VCs to delve into early stages and support entrepreneurs in urgent need of help, nurturing "myths." Large-scale VC funds often fall into the trap of managing scale expansion, participating in later rounds, and launching "VC Coin." This is an old problem for Web2 VCs, and Web3 VCs have not been spared. I believe this situation will gradually be corrected.

The essence of the competition between Meme and VC coins is the competition for existing market funds and liquidity. In an environment with limited new funds, the low circulation and high FDV characteristics of VC coins, along with the continuous emergence of projects, make it difficult for market funds to sustain, and retail investors' willingness to take over decreases. The full circulation and fair distribution of Meme coins align with market psychology, becoming a "new weapon" for retail investors.

However, the PVP attributes of Meme coins are essentially unsustainable. Most, except for a few top projects, find it difficult to have long-term value support. Apart from BTC, ETH, and a very few DeFi infrastructure projects, most project tokens are PVP. The predicament of VC coins has no good solution in the short term; it needs to go through a complete bull and bear cycle, allowing the market to naturally clear, and to rebuild trust and fairness.

Issuing tokens is not the end point, but the true starting point for the project's operation. The project team needs to seriously consider the implementation of application scenarios, stable cash flow income, and maintaining active users and a real community after issuing tokens. The "VC token project" needs to better think about Token Market Fit, consider the necessity and usage of the tokens, engage the broad community, and distribute chips to strengthen interest binding.

Potential Tomorrow's Stars

Innovative narratives such as AI and DeSci are driving the industry into a new stage. The leading ecosystem continues to strengthen its moat, while emerging tracks and projects are poised for takeoff. Looking ahead, multiple fields are expected to stand out:

RWA essentially allows blockchain to account for mainstream financial assets globally, with a current penetration rate of less than 0.1%. A tenfold increase in penetration rate could spawn multiple secondary assets.

Re-staking as the grand narrative of 2024, the coin price has not yet fully reflected this. With the gradual launch of AVS, 2025 may welcome a climax. ZK projects such as (RiscZero and hardware acceleration Ingonyama will gradually showcase market potential.

AI agents are expected to become the rising stars of the encryption industry, capable of processing massive market data to achieve real-time precise trading decisions. In the DeFi field, they can optimize lending rates and liquidity pool pricing mechanisms, enhancing the efficiency of capital utilization. They open up new possibilities for the intelligent management of crypto assets and redefine the boundaries of asset management.

The PayFi track has received widespread attention. An ecosystem that enables seamless and low-cost payments is entering a rapid development phase. Projects that bridge traditional finance with encryption, such as Layer 2 solutions and stablecoin issuers ), will be in the spotlight. Payment protocols that are deeply integrated with mainstream services and facilitate the convenient conversion between encryption and fiat currencies will promote the integration of encryption into daily life.

The integration of AI and blockchain is an important development direction. Decentralized AI infrastructure and AI agents (Agent) are rapidly emerging, ushering in a new growth cycle. Projects aimed at building decentralized AI networks or AI-driven applications are poised to become new highlights in the industry. Blockchain provides a reliable foundational layer for AI interactions and transactions, enhancing data transparency and security, opening up new opportunities for autonomous AI applications, and accelerating the pace of innovation.

"Mass Adoption" Breakthrough Prospects

DePIN and other verticals are attracting Web2 users by providing value to the ecosystem through additional resources. For example, Helium connects Web2 telecom giants via 5G networks, while Render provides low-cost GPU support for gaming, rendering, and AI fields. The payment sector may drive the next wave of mass adoption, as infrastructure that offers efficient encryption payments and fiat currency conversion solutions for physical stores will bring a new wave of users.

The payment sector is expected to become the first track for "mass adoption" of blockchain. Stablecoins demonstrate superior efficiency over traditional banking in non-dollar countries, providing various utilities for residents of third-world countries. Once a compliance framework is established, the potential is equivalent to the trillion-dollar traditional payment systems of Web2. Demand will spur various startup projects, from upstream stablecoin issuers to downstream payment services, possibly ushering in the first large-scale application era of blockchain.

"Large-scale adoption" brings funding ( institutions/retail investors ) on one hand, and users ( mainly retail investors ) on the other hand. Traditional institutions are more likely to enter the market driven by policy factors, while retail investors have a leading advantage in the Solana ecosystem. The new front-end user experience will drive breakthroughs, making it easier for less experienced users to start using DeFi. Products ( with existing distribution channels, such as wallets ), will also be critical by providing seamless interactions through embedded DeFi experiences.

Bull Market Phase Determination

We may currently be in the mid-stage of a bull market. The approval of the Bitcoin ETF implies that Bitcoin exists within a centralized regulatory framework, making trading legal and regulated, which will give rise to a wider variety of financial derivatives. The participant base is becoming increasingly broad, directly reducing market price volatility. In the future, it is hard to see a halving or significant drop in the short term; the cyclical impact of Bitcoin halving is weakening, and the market may shift from rapid bear and bull phases to a long-term slow bull.

Currently in the market cycle "optimistic phase", non-believers in encryption have begun to purchase and hold some encryption assets, with more institutions and governments expressing interest. The Trump administration's return to power will promote a more favorable encryption regulatory environment, and the proposal for Bitcoin strategic reserves will further boost market confidence.

Predicting the end time of market cycles is somewhat counterintuitive. A market crash like that of 2022 is unlikely to occur, as the encryption environment has improved. Many institutions are following Microstrategy's lead to accumulate Bitcoin in large quantities, making an 80% drop improbable. 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 its bull market cycle. The essence of Bitcoin is to combat inflation and safeguard wealth.

Retail Investor Recommendations

1. Focus on high certainty tracks, with a key focus on BTC, Meme coins, and AI narrative tracks, and invest cautiously in old altcoins that lack new narrative support.

2. Follow the trend, understand the market trends, and keep up with hot topics and points of attention. The cycle is the core of the market, timely layout and exit.

3. Prepare a sum of money that, even if completely lost, will not affect your current life. Appropriately withdraw the cost when suitable, ensuring that the funds remaining in the market are all profits. Avoid continuously adding principal and using leverage.

4. Maintain a robust strategy and approach market changes with reverence. Investment trading is a practice; the encryption market is developing towards greater maturity and professionalism. Investors should first cultivate internally and then learn externally, maintaining a stable and strong core, prioritizing risk.

5. Prioritize risk management. Blue-chip assets like Bitcoin and Ethereum are generally safer. Use hardware wallets and trusted security tools. Focus on high-quality, sustainable projects rather than chasing short-term trends. Identify long-term outperforming assets and avoid holding underperforming assets.