As 2025 approaches, let’s take a look at how crypto VCs view market interpretation and potential opportunities.

Author: Zen, PANews

As the New Year's bell is about to ring, the encryption industry has ushered in a new development node. In the past year of 2024, the market has experienced recovery, innovation and adjustment, leading projects have continued to consolidate their positions, and emerging tracks have quietly emerged, laying the foundation for the future. In this year's ups and downs, VC, as the vane of industry development, has not only witnessed changes in the market, but also shaped the direction of the industry at the intersection of capital, community, and technology.

Standing at the starting point of 2025, PANews invited more than a dozen top VCs to share their observations and thoughts on the encryption industry. They reviewed the highlights of the past year, analyzed the opportunities and challenges of the current market, and made predictions about future development trends. In this rapidly changing field, which projects and tracks are becoming the focus of VCs? Let’s step into the perspective of VCs and explore “yesterday, today and tomorrow” of the encryption industry.

The most impressive project in 2024

In the past year, the encryption industry has ushered in a new wave of growth, driven by both market recovery and technological innovation. From infrastructure upgrades to breakthroughs in emerging tracks, countless projects came to light this year, demonstrating strong vitality and innovation potential. Some of these projects have not only attracted a lot of attention due to their unique technical paths or business models, but have also left a deep mark inside and outside the industry.

James Wo, founder and CEO of DFG (Digital Finance Group), pointed out that Hyperliquid initially started as a perpetual contract decentralized exchange (perp DEX) with excellent performance, attracting a large number of users while maintaining transaction execution speed and liquidity. Additionally, Hyperliquid launched the token without VCs or listing it on a centralized exchange (CEX), becoming one of the most successful airdrops in crypto history. “The platform is expanding its offerings and launching its own HyperEVM ecosystem, which includes many native decentralized applications (dApps), to increase the utility of its spot ecosystem. The platform earns significant fees through on-chain clearing and market making, and gradually Eating the market share of leading DEX and CEX.”

Web3Port co-founder Chris also spoke highly of Hyperliquid and was deeply impressed by its market share, community airdrop and distribution mechanism, and wealth effect. In addition, he also mentioned Pump.fun, the most successful Meme coin launch platform this year. Compared with existing platforms on the market, Pump.fun successfully pushed the concept of "Meme launch platform" to the top narrative and triggered a craze in the Meme market. Chris said that the inspiration of Pump.fun is that Web3 projects can succeed by building products that are truly practical, have high user experience and market fit.

Ryan Rodenbaugh, CEO and co-founder of Wallfacer Labs (vaults.fyi), said that the resurgence of mature lending protocols such as AAVE and Compound in the DeFi field, as well as the emergence of high-quality new entrants such as Morpho, Euler, and Ajna, are exciting. Although DeFi isn't gaining as much traction in the current cycle as it once was, the low-profile success of these protocols is still well worth watching and tracking.

Among the answers given by VCs, Pudgy Penguin is one of the projects that appears most frequently. Joanna, founder and CEO of Jsquare Group, highly praised Pudgy Penguin, believing that he has single-handedly led to the renaissance of the entire NFT track. “As a first-round investor and Pudgy NFT holder, I fully felt the powerful energy of Luca’s Web2+Web3 integrated thinking as a representative of the new generation of entrepreneurs, which also convinced me of one of the first principles: Invest in next generation ”

"Ethena has performed well in the DeFi field with its USDE stablecoin. It has profited from high funding rates by establishing 1x long and 1x short positions on centralized exchanges (CEX)." said Dinghan, partner of Jsquare , Ethena’s cooperation with BlackRock BUIDL Fund ensures that USDE can maintain stable returns even when the funding rate is negative, further consolidating its long-term viability.

How will the Bitcoin market perform?

Bitcoin has shown amazing growth momentum in 2024. According to CoinGecko data, as of December 31, 2024, the price of Bitcoin has increased by 119.1%. This increase was mainly driven by institutional adoption of spot ETFs, the April halving event, and market optimism following the U.S. election. Looking forward to 2025, Web3Port co-founder Chris believes that the Bitcoin bull market is expected to continue, and it is a high probability event that it will exceed US$200,000 next year. He said that as the market matures, the supply and demand relationship of Bitcoin will be further strengthened, and Bitcoins below $50,000 may become history in the future bull-bear cycle.

Regarding the upper limit that Bitcoin can reach next year, Ryze Labs research analyst Allen also holds a similar view. He mainly uses the technical indicators Pi Cycle and 2Y MA Multiplier to judge the top. He said that historically, the times when these two indicators resonated were: December 5, 2013, December 16, 2017, and the most recent Pi Cycle top signal appeared on April 12, 2021. According to historical data, these indicators have high reference value. Allen noted that Bitcoin’s top could be around $200,000, based on estimates from the 2Y MA Multiplier. These two signals have ready-made indicators on TradingView, and reminders can be set to facilitate top judgment and position reduction decisions.

“If forecasted from a cautious perspective, I think Bitcoin’s next stage peak may reach a peak of 120,000 to 150,000 US dollars, and then fluctuate between 100,000 to 150,000 US dollars.” Waterdrip Capital investment manager Evan Lu said that based on Trump’s remarks on the policy of establishing a strategic reserve of Bitcoin, assuming that the market value of gold remains unchanged, as long as the market value of Bitcoin fails to catch up with the market value of gold, Bitcoin can be regarded as a growth asset, and its price It could hit $600,000 per coin, but the process could take 5 to 10 years.

Evan said that during the last halving cycle (that is, May 2020), Bitcoin experienced a slow rise and reached its first high in April 2021, rising from about 9,000 US dollars to 65,000 US dollars. From April to July, due to the impact of the "519 Incident", the price of Bitcoin experienced a significant correction. However, the market then ushered in a second wave of gains, eventually reaching the highest point of the previous cycle. If the price on the current halving day is used as a benchmark, this may mark the beginning of a new round of gains. It is expected that between the end of 2024 and the first quarter of 2025, Bitcoin may experience a slight decline or move sideways, and then enter a second wave of rising prices, when the price may touch $120,000 to $150,000.

"What is different from the past is that this round of market dynamics will be profoundly affected by multiple factors, the most critical of which include the external liquidity brought by Bitcoin spot ETFs and the continued capital inflow driven by future Bitcoin reserve policies." Evan believes , which means that between now and the high point next year, the Bitcoin market may not experience a sharp correction, but will maintain a volatile upward trend and gradually move towards a higher price level.

On the topic of Bitcoin, Web3.com Ventures investment director Nemo quoted MicroStrategy co-founder Michael Saylor: “Spend 1,000 hours of research and you will become a Bitcoin maximalist. You will realize that this is not only A technology, but also a kind of moral justice. Bitcoin brings freedom, economic and property rights to 8 billion people, and also provides 4 million companies around the world with the opportunity to invest funds in non-toxic assets.”

Will the dispute between Meme and “VC Coin” continue? What is the

solution to the dilemma?

The series of controversies regarding "VC coins" have been an important issue that cannot be avoided in the past year. Will Wang, a partner at Generative Ventures, put forward a novel perspective on this. He said that once the scale of primary market VC funds exceeds US$30-50 million, it will be difficult to bring excess returns to LPs. Will Wang believes that only if the scale is sophisticated enough, can VCs be forced to go deep into the early stages and truly support entrepreneurs who are in urgent need of help, thereby creating a real "myth". Looking back at those large-scale VC funds, they often fall into the trap of expanding management scale, participate in later rounds, and launch "VC coins" that are criticized by the market. This approach is actually an old problem of Web2 VC, and Web3 VC has not been immune to it in the past few years.

“I believe this situation will gradually be corrected. Whether it is technology or financial innovation, there will always be a non-consensus stage, and this is when VC should take action. The market will eventually reward those who dare to act in non-consensus periods. VC." Will Wang added.

What is the essence of the dispute between Meme and VC coins? Chris, co-founder of Web3Port, pointed out that it boils down to the competition between existing funds and liquidity in the market. In an environment where new funds are limited, the characteristics of VC coins such as low circulation, high FDV, and the continuous emergence of VC coin projects have made it difficult for market funds to sustain support, and the willingness of retail investors to take over has been significantly reduced. The advantage of Meme coin lies in its full circulation and fair distribution mechanism, which fits the psychology of market investors and becomes a "new weapon" for retail investors to counterattack the advantages of institutions.

However, the PVP (player competition) attribute of Meme coins is inherently unsustainable, because except for a few top Meme projects, most Meme coins cannot have long-term value support. Chris said that looking at the overall structure of the crypto market, except for BTC and ETH, as well as a very small number of DeFi infrastructure projects with stable income sources, the tokens of most other projects are PVP. Market participants compete with each other, and profits and losses come from the same source. . Regarding the current predicament of VC coins, he believes that there is no cure in the short term. In the context of market liquidity shortages and the increasing advantages of institutional investment, alleviating the problem of VC coins requires going through a complete bull-bear cycle, allowing the market to clear up naturally, and rebuilding trust and fairness.

"Issuing currency is not the end, but the starting point for the real operation of the project." Evan Lu, investment manager of Waterdrip Capital, believes that project parties cannot do projects with the idea that "financing is profit, and issuing currency is shipment." Instead, you need to seriously consider whether you can really implement application scenarios, whether you can have more stable cash flow income, and whether the project can still maintain active users and a real community after the currency is issued.

Jiawei, the main person in charge of IOSG Ventures, said frankly that the "VC coin project" needs to think better about Token Market Fit. Is it necessary to launch the token? What is its purpose? What kind of token will the community pay for? Let the wider community participate. Come in and spread the chips to strengthen the binding of interests.

Which ecosystems, tracks, and projects may have outstanding performance

and become the stars of tomorrow in the industry?

As the encryption market rises, a new round of innovative narratives such as AI and DeSci are driving the industry to a new stage of development. After experiencing the baptism of the market cycle, the leading ecology continues to consolidate the moat, while emerging tracks and projects are also quietly emerging, accumulating strength for future explosions. Looking forward to the next year, which ecology, tracks and projects are expected to stand out and become the "stars of tomorrow" leading the industry? Many institutions have provided unique insights.

Will Wang, partner at Generative Ventures, believes that many people are confused about the nature of RWA (Real World Asset). "We believe that RWA is essentially one thing: allowing blockchain to record accounts for global mainstream financial assets." He said that currently, the penetration rate of this "on-chain accounting" is less than 0.1%. Even if the penetration rate increases by only one order of magnitude, it may give rise to multiple secondary assets similar to ONDO and USUAL.

Jiawei, the main person in charge of IOSG Ventures, said that re-staking, as the big narrative of 2024, has not yet been reflected in the currency price. With the successive launch of AVS, it may reach its climax in 2025; in addition, ZK series projects (RiscZero, Hardware acceleration Ingonyama, etc.) will also gradually demonstrate its market potential.

"AI Agent is expected to become the star of tomorrow in the encryption industry." Ryze Labs research analyst Allen said that AI Agent has the ability to process massive market data and will be able to make accurate trading decisions in real time in the future, with a reaction speed far exceeding that of traditional humans. Traders; in the DeFi field, AI Agent can optimize the pricing mechanism of lending rates and liquidity pools, thereby significantly improving the efficiency of fund utilization; in addition, it also opens up new possibilities for the intelligent management of crypto assets and redefines The boundaries of asset management.

In this topic, the PayFi track has been mentioned repeatedly by many institutions, and it is undoubtedly the focus of market attention. As cryptocurrencies gain popularity, ecosystems that enable seamless, low-cost payments are experiencing rapid development. Dinghan, a partner at Jsquare, predicts that projects that bridge traditional finance with cryptocurrencies (such as Layer 2 solutions and stablecoin issuers) will receive widespread attention in the future. Those payment protocols that can be deeply integrated with mainstream services and easily convert cryptocurrencies into fiat currencies will become a key force in promoting the integration of cryptocurrencies into daily life.

The integration of AI and blockchain is also regarded as an important development direction in the future. Dinghan said that with the rapid rise of decentralized AI infrastructure and AI agents, this field is ushering in a new growth cycle. Projects to build decentralized AI networks or AI-driven applications are gaining momentum and are expected to become a new highlight in the industry. “Blockchain provides a trustworthy basic layer for AI interactions and transactions, which not only improves the transparency and security of data, but also opens up a new situation for the widespread implementation of autonomous AI applications, further accelerating the pace of innovation in this field. ”

Is the clichéd “mass adoption” expected to see a breakthrough? Who will

hold the Holy Grail?

"We have seen some "mass adoption" in different areas of the industry." James Wo, founder and CEO of DFG (Digital Finance Group), said that vertical areas such as DePIN are attracting Web2 users and providing their ecosystem with additional resources. value. "For example, Helium connects existing Web2 telecom giants through 5G networks, and Render provides GPUs at low cost to help the gaming, rendering and AI fields." James believes that the next area to drive larger-scale adoption may be the payment field. Infrastructure that can provide efficient crypto payment and fiat redemption solutions for physical stores will drive a new wave of users, and this trend will further accelerate as retail investors begin to invest and hold crypto assets.

YBB Capital investment research manager Zeke believes that judging from recent industry discussion trends, the payment track is expected to become the first track for blockchain "Mass Adoption". Stablecoins have demonstrated the ability to surpass the financial efficiency of traditional banks in non-US dollar countries, and for residents of third world countries, they also have various functions such as anti-domestic currency inflation, virtual service subscriptions, and financial investments. Once the compliance framework is established, the potential contained in this track is equivalent to the trillion-level traditional payment system of Web2. The huge demand will also spawn various start-up projects, from upstream stablecoin issuers to downstream payment services, it will be a true blooming of a hundred flowers. The first era of large-scale application of blockchain is likely to start from here.

Joanna, founder and CEO of Jsquare Group, expressed optimism about the progress of "mass adoption" in the next year. She said that mass adoption, on the one hand, brings money in (institutions/retail investors), and on the other hand, brings in users (mainly retail investors). Traditional institutions are more likely to enter the market driven by policy factors, but at the retail level, from the perspective of ecological positioning and track selection, the Solana ecosystem has a leading advantage. At the same time, Joanna has high hopes for Pudgy Penguins in her investment portfolio, expecting it to achieve breakthroughs in the future, and believes that Luca can set a benchmark for the new generation of entrepreneurs.

Ryan Rodenbaugh, CEO and co-founder of Wallfacer Labs (vaults.fyi), said that driving this breakthrough will be a new front-end user experience, making it easier for less experienced users to start using DeFi. In addition, it will also be key for products with existing distribution channels (such as wallets) to provide users with seamless interactions through embedded DeFi experiences.

Where in the bull market are we, and when will it be?

"We may be in the middle stage of the bull market. As for when it will end, we think we need to consider the significance of the adoption of the Bitcoin ETF." Zeke, investment research manager at YBB Capital, said that ETF allows Bitcoin to exist within a centralized regulatory framework. Under this circumstance, transactions are legal and fully regulated, which also means that a wider range of financial derivatives will be born. As the number of legal participants becomes wider and wider, this will directly reduce the price volatility of the market. Therefore, in the future, it will be difficult for us to see the possibility of halving or falling sharply in the short term. Coupled with the weakening of the cyclical impact of Bitcoin's halving, the market will transform from the previous sharp bear to long-term slow bull.

James Wo, founder and CEO of DFG (Digital Finance Group), also expressed his views on the long-term future of the market. At present, we may be in the "optimistic phase" of the market cycle. People who do not believe in crypto are beginning to buy and hold some crypto assets. At the same time, more and more institutions are and governments expressing interest in the crypto industry. The Trump administration's return to power will also promote a friendlier crypto regulatory environment, and the proposal for a Bitcoin strategic reserve will undoubtedly further enhance market interest and confidence in Bitcoin and the entire crypto industry.

“It’s somewhat counterintuitive to predict the end of a market cycle.” James added that if we are expecting a market crash like 2022, this is unlikely to happen because the crypto environment has improved and evolved. Many institutions have begun following Microstrategy's lead in accumulating Bitcoin, so it is unlikely to see the market cycle "end" with an 80% plunge. There may be corrections in the future, but it is unlikely to return to bear market levels.

Nemo, investment director of Web3.com Ventures, believes that in the short term, Bitcoin has completed at least half of the bull market process. He said that from the perspective of optimism and belief, Bitcoin will not let anyone down. The essence of Bitcoin is to fight inflation and protect wealth.

How should retail investors seize opportunities in the bull market?

Web3Port co-founder Chris suggested that retail investors should focus on high-certainty tracks, focusing on BTC, Meme coins and AI narrative tracks, and be cautious about investing in old altcoins that lack new narrative support. In addition, we must learn to follow the trend, understand market trends, and keep up with hot spots and focus points. "Cycle is the core of the market. Make timely arrangements when the cycle comes and exit in time before the cycle subsides."

Ryze Labs research analyst Allen said that the bull market is the main reason why most people lose money. "Investors may have made unexpected profits in the early stage, but in the mid-term they began to use borrowed funds and increase leverage. In the end, during a rapid correction, all floating profits turned into floating losses, and they were even forced to cut their flesh and leave the market." Allen believes that, In order to avoid this situation, the best strategy is to prepare a sum of funds that will not affect your current life even if it is completely lost, and withdraw the cost at the appropriate time to ensure that the funds retained on the market are profits. The most taboo approach is to continuously add principal, keep investing, and use leverage when the principal is insufficient. This kind of operation seems to be able to quickly expand profits, but in fact the risk is extremely high. Once the market fluctuates violently, the consequences are often unimaginable.

YBB Capital Investment research manager Zeke also pointed out the potential risks of the bull market: "The market changes in 25 years will be more complicated than in the past. The overall investment strategy needs to be more stable than before 24 years. The higher the market is, the more dangerous it is. We No one can accurately judge the market direction, 25 years We should be more in awe of market changes. "Zeke said that investment and trading is a practice. The encryption market is constantly developing towards more maturity and professionalization. Investors should first cultivate internally and then learn externally. It is especially important to maintain a stable and strong core, and always put risks first.

Dinghan, a partner at Jsquare, suggested that retail investors should prioritize risk management. "While cryptocurrencies have significant return potential, their volatility remains a key issue." He added that blue-chip assets such as Bitcoin and Ethereum are generally safer options for those seeking passive investments. For investors who are more involved, security is crucial – using hardware wallets and trusted security tools. Focus on high-quality, sustainable projects rather than chasing short-term trends. In any market, it is critical to identify assets that have outperformed over the long term, rather than holding on to assets that have lagged the market.