As 2025 approaches, exploring market trends and potential opportunities in the eyes of encryption VC.

As the New Year’s bell is about to ring, the encryption industry is ushering in a new development node. In 2024, the market has experienced recovery, innovation, and adjustments, with leading projects continuously consolidating their positions and emerging tracks quietly rising, laying the foundation for the future. Throughout the ups and downs of this year, VC has served as a barometer of industry development, witnessing not only the changes in the market but also shaping the direction of the industry at the intersection of capital, community, and technology.

Standing at the starting point of 2025, we invited more than ten 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 development trends. In this fast-changing field, which projects and tracks are becoming the focus of VCs? Let's step into the perspectives of VCs and explore the "yesterday, today, and tomorrow" of the encryption industry.

The Most Impressive Projects of 2024

In the past year, the encryption industry has welcomed a new wave of growth driven by the dual forces of market recovery and technological innovation. From infrastructure upgrades to breakthroughs in emerging sectors, countless projects have emerged this year, showcasing strong vitality and innovative potential. Some of these projects, through unique technological paths or business models, have not only attracted significant attention but have also left a profound mark both inside and outside the industry.

The founder of an investment institution pointed out that Hyperliquid initially started as a high-performance decentralized exchange for perpetual contracts, attracting a large number of users while maintaining trading execution speed and liquidity. In addition, the tokens launched by Hyperliquid did not have VC or listing on centralized exchanges, becoming one of the most successful airdrops in crypto history. "The platform is expanding its products and launching its own HyperEVM ecosystem, which includes many native decentralized applications to increase the utility of its spot ecosystem. The platform earns substantial fees through on-chain clearing and market making, gradually eating into the market share of leading DEXs and CEXs."

Another industry insider has also given high praise to Hyperliquid, being impressed by its market share, community airdrop and distribution mechanism, as well as its wealth effect. In addition, he mentioned Pump.fun - the most successful Meme coin launch platform this year. Compared to existing platforms in the market, Pump.fun has successfully pushed the concept of "Meme launch platform" to the top narrative, igniting a wave in the Meme market. He stated that the revelation from Pump.fun is that Web3 projects can achieve success by building products that are truly practical, have high user experience, and are well-suited to the market.

The CEO of an investment institution stated that the revival of mature lending protocols in the DeFi space such as AAVE and Compound, along with the emergence of high-quality newcomers like Morpho, Euler, and Ajna, is exciting. Although DeFi has not garnered the same level of attention in the current cycle as in the past, the understated success of these protocols is still very worth paying attention to and tracking.

Among the answers given by various VCs, Pudgy Penguin is one of the most frequently mentioned projects. A founder of an investment institution praised Pudgy Penguin highly, believing that it has single-handedly driven the revival of the entire NFT sector. "As an early-stage investor and Pudgy NFT holder, I have fully experienced the powerful energy that Luca, as a representative of a new generation of entrepreneurs, has unleashed through the integration of Web2 and Web3, which also solidified one of my first principles: Invest in next generation."

"Ethena has performed remarkably in the DeFi space with its USDE stablecoin, profiting from high funding rates by establishing 1x long and 1x short positions on centralized exchanges." A partner at an investment firm stated that Ethena's collaboration with a well-known fund ensures that the USDE can maintain stable returns even when funding rates are negative, further solidifying its long-term viability.

How will the market performance of Bitcoin unfold?

Bitcoin has shown remarkable growth momentum in 2024. As of December 31, 2024, the price of Bitcoin has increased by a cumulative 119.1%. This surge is primarily attributed to institutional adoption of spot ETFs, the halving event in April, and optimistic market sentiment following the U.S. elections. Looking ahead to 2025, a co-founder of an investment firm believes that the Bitcoin bull market is likely to continue, with a breakthrough of 200,000 USD next year being a high-probability event. He stated that as the market matures, the supply and demand relationship for Bitcoin will further strengthen, and Bitcoin priced below 50,000 USD may become a thing of the past in future bull and bear cycles.

Regarding the upper limit that Bitcoin could reach next year, a certain research analyst holds a similar view, primarily judging the peak through the technical indicators Pi Cycle and 2Y MA Multiplier. He stated that historically, the times when these two indicators resonated were: December 5, 2013, December 16, 2017, and the most recent appearance of the Pi Cycle top signal—April 12, 2021. According to historical data, these indicators have high reference value. He pointed out that based on the estimation from the 2Y MA Multiplier, the peak of Bitcoin could be around $200,000. Both of these signals have ready-made indicators on TradingView, which can be set to alert, making it convenient for peak judgment and position reduction decisions.

"If we adopt a cautious perspective for prediction, I believe that the next phase peak for Bitcoin may reach between $120,000 and $150,000, followed by fluctuations between $100,000 and $150,000." A certain investment manager stated that based on Trump's comments regarding the establishment of a Bitcoin strategic reserve, assuming the market value of gold remains unchanged, as long as the market value of Bitcoin does not exceed that of gold, Bitcoin can be regarded as a growth asset, with its price possibly touching $600,000 per coin, but this process may take 5 to 10 years.

He stated that during the previous halving cycle (i.e., May 2020), Bitcoin experienced a slow rise, reaching its first peak in April 2021, increasing from about $9,000 to $65,000. During the period from April to July, due to the impact of the "519 incident", the Bitcoin price saw a significant correction. However, the market then welcomed a second wave of increases, ultimately reaching the highest point of the previous cycle. If the price on the date of this halving is used as a benchmark, it may signal the beginning of a new round of increases. It is expected that between the end of 2024 and the first quarter of 2025, Bitcoin may experience a slight decline or sideways consolidation, followed by a second wave of increases, at which time the price may reach $120,000 to $150,000.

"Unlike in the past, the current market dynamics will be profoundly influenced by multiple factors, among which the most critical include the external liquidity brought by the Bitcoin spot ETF and the ongoing capital inflow driven by future Bitcoin reserve policies." He believes this means that from now until the peak next year, the Bitcoin market may not experience significant corrections again, but rather maintain a trend of fluctuating upward, gradually moving towards higher price levels.

In the topic of Bitcoin, a certain investment director quoted a well-known entrepreneur's remarks: "Spend 1000 hours researching, and you will become a Bitcoin extremist. You will realize that this is not just a technology, but a moral justice. Bitcoin brings freedom, economic and property rights to 8 billion people, while also providing 4 million companies worldwide with the opportunity to invest in non-toxic assets."

Will the dispute between Meme and "VC coin" continue, and what is the good solution to resolve the dilemma?

The series of controversies surrounding "VC coins" has been an important topic that cannot be avoided over the past year. A partner from an investment firm has presented a novel perspective and viewpoint, stating that once the scale of a first-tier market VC fund exceeds 30 to 50 million USD, it becomes difficult for LPs to achieve excess returns. He believes that only a sufficiently refined scale can compel VCs to delve into the early stages and truly support entrepreneurs in need of assistance, thereby nurturing real "myths." In contrast, those large-scale VC funds often fall into the trap of expanding management scale, participating in later rounds, and launching the market-criticized "VC coins." This practice is actually an old problem of Web2 VCs, and the Web3 VCs have not been able to escape it in recent years.

"I believe this situation will gradually be corrected. Whether it is technological or financial innovation, there will always be a phase of non-consensus, and this is precisely when VC should take action. The market will ultimately reward those VCs who dare to act during non-consensus periods," he added.

What is the essence of the dispute between Meme and VC coins? A co-founder pointed out that it ultimately boils down to the competition between the market's existing funds and liquidity. In an environment where new capital is limited, VC coins, due to their low circulation and high FDV characteristics, as well as the constant emergence of new VC coin projects, make it difficult for market funds to be sustained, significantly reducing retail investors' willingness to buy in. The advantage of Meme coins lies in their full circulation and fair distribution mechanism, aligning with the psychology of market investors, and becoming a "new weapon" for retail investors to counter the advantages of institutions.

However, the PVP (player versus player) nature of Meme coins is essentially unsustainable, as most Meme coins struggle to have long-term value support, except for a few top Meme projects. He stated that, from the overall landscape of the encryption market, apart from 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, where market participants compete against each other, with profits and losses stemming from the same source. Regarding the current predicament of VC coins, he believes that there is no good solution in the short term. In the context of tight market liquidity and the increasing advantages of institutional investment, alleviating the issues of VC coins requires going through a complete bull and bear cycle, allowing the market to naturally clear and rebuild trust and fairness.

"Issuing tokens is not the end, but the true starting point for a project's operation." A certain investment manager believes that project teams should not approach the project with the mindset of "financing equals profit, issuing tokens equals selling products." Instead, they need to seriously consider whether they can truly implement application scenarios, whether they can achieve more stable cash flow income, and whether the project can maintain active users and a genuine community after the token issuance.

The head of a certain investment institution admitted, "VC coin projects" need to think better about Token Market Fit, whether there is a necessity to launch the token, what its use is, and what kind of tokens the community will pay for, in order to involve a broader community and disperse chips to strengthen the binding of interests.

Which ecosystems, tracks, projects, or standout performances are becoming the rising stars of the industry?

With the rise of the encryption market, new narratives of innovation such as AI and DeSci are driving the industry towards a new stage of development. After experiencing the baptism of market cycles, leading ecosystems continue to strengthen their moats, while emerging tracks and projects are quietly rising, accumulating power for future explosions. Looking ahead to the next year, which ecosystems, tracks, and projects are expected to stand out and become the "rising stars" leading the industry? Many institutions have provided unique insights.

A partner at an investment firm believes that many people do not fully understand the nature of RWA (Real World Asset). "We believe that RWA is essentially one thing: to have blockchain account for mainstream financial assets globally." He stated that currently, the penetration rate of this "on-chain accounting" is less than 0.1%. Even if the penetration rate increases by just one order of magnitude, it could give rise to multiple secondary assets similar to ONDO and USUAL.

A head of an investment institution stated that re-staking, as the overarching narrative for 2024, has not yet been reflected in the cryptocurrency prices. With the successive launch of AVS, it may reach its peak in 2025; in addition, ZK projects (such as RiscZero, hardware-accelerated Ingonyama, etc.) will gradually showcase their market potential.

"AI Agent is expected to become the rising star of the encryption industry." A research analyst stated that AI Agent has the capability to process vast market data and can make precise trading decisions in real-time in the future, with a response speed far exceeding that of traditional human traders; in the DeFi space, AI Agent can optimize the pricing mechanisms of lending rates and liquidity pools, significantly enhancing the efficiency of capital utilization; in addition, it also opens up new possibilities for the intelligent management of crypto assets.