2025 Market Outlook in the Eyes of Encryption VC

With the New Year approaching, the encryption industry is embracing new development opportunities. In 2024, the market has experienced recovery, innovation, and adjustment, with leading projects further consolidating their positions and emerging tracks quietly rising. As a barometer of industry development, VC has not only witnessed market changes but is also shaping the direction of the industry at the intersection of capital, community, and technology.

Standing at the starting point of 2025, we 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 development trends. In this rapidly changing field, which projects and tracks are becoming the focus of VCs? Let us delve into the VC perspective and explore the future landscape of the encryption industry.

The Most Impressive Projects of 2024

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

James Wo, the founder and CEO of DFG, pointed out that Hyperliquid, as a high-performance perpetual contract DEX, has attracted a large number of users while maintaining trading execution speed and liquidity. The platform is expanding its products and launching its own HyperEVM ecosystem, which includes many native dApps to increase the utility of the spot ecosystem. The platform earns significant fees through on-chain clearing and market making, gradually encroaching on the market share of leading DEXs and CEXs.

Chris, co-founder of Web3Port, 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 frenzy.

Ryan Rodenbaugh, CEO of Wallfacer Labs, stated that the revival of mature lending protocols in the DeFi space such as AAVE and Compound, as well as the emergence of high-quality newcomers like Morpho, Euler, and Ajna, is exciting. Although DeFi has not garnered as much attention in the current cycle as in the past, the understated success of these protocols is still worth noting.

Pudgy Penguin is one of the projects mentioned by multiple VCs. Joanna, the founder and CEO of Jsquare, believes that it has single-handedly revitalized the entire NFT sector, showcasing the fusion thinking of the new generation of entrepreneurs between Web2 and Web3.

Jsquare partner Dinghan pointed out that Ethena has performed remarkably in the DeFi field with the USDE stablecoin, profiting from high funding rates by establishing 1x long and 1x short positions on CEX. Its collaboration with the BlackRock BUIDL fund further solidifies long-term viability.

Bitcoin Market Trend Prediction

Chris, co-founder of Web3Port, believes that the Bitcoin bull market is likely to continue, and breaking through $200,000 in 2025 is a high-probability event. As the market matures, the supply-demand relationship of Bitcoin will be further strengthened, and Bitcoin below $50,000 may become a thing of the past in future bull-bear cycles.

Ryze Labs research analyst Allen determines the top using the technical indicators Pi Cycle and 2Y MA Multiplier. He points out that according to the 2Y MA Multiplier estimate, the Bitcoin top may be around $200,000.

Evan Lu, investment manager at Waterdrip Capital, predicts that Bitcoin's next phase peak could reach between $120,000 and $150,000, followed by fluctuations between $100,000 and $150,000. Based on Trump's remarks about establishing a Bitcoin strategic reserve, assuming the market value of gold remains unchanged, the price of Bitcoin could touch $600,000 per coin, but this process may take 5 to 10 years.

Evan believes that the current market dynamics will be influenced by the external liquidity brought by Bitcoin spot ETFs and the continuous capital inflows driven by future Bitcoin reserve policies. From now until the peak next year, the Bitcoin market may not experience significant pullbacks but rather maintain a trend of oscillating upward.

The Future of the Meme and "VC Coin" Controversy

Will Wang, a partner at Generative Ventures, pointed out that after the scale of first-tier market VC funds exceeds 30-50 million USD, it becomes difficult to bring excess returns to LPs. He believes that smaller-scale VC funds can better support early-stage entrepreneurs, while large-scale VC funds often fall into the trap of managing scale expansion, leading to the controversial "VC token" in the market.

Chris, the co-founder of Web3Port, believes that the competition between Meme and VC coins is essentially a competition between the existing market funds and liquidity. In an environment with limited new funds, VC coins, due to their low circulation and high FDV characteristics, along with the constant emergence of new projects, make it difficult for market funds to sustain. The full circulation and fair distribution mechanism of Meme coins aligns with the psychology of retail investors, becoming a "new weapon" against institutional advantages.

However, Chris pointed out that the PVP attributes of Meme coins are essentially unsustainable. Regarding the VC coin dilemma, he believes that there is currently no good solution in the short term, and that a complete bull-bear cycle is needed for the market to clear naturally, restoring trust and fairness.

Evan Lu, the investment manager of Waterdrip Capital, emphasized that issuing tokens is not the end point, but rather the starting point for the real operation of a project. Project teams need to seriously consider issues such as the implementation of application scenarios, stable cash flow income, and maintaining active users and a genuine community after the token issuance.

Jiawei, the investment principal at IOSG Ventures, suggests that "VC coin projects" need to think better about Token Market Fit, consider the necessity and use of the tokens, and how to involve a broader community in order to decentralize chips and strengthen interest binding.

Future Potential Tracks and Projects

Will Wang, a partner at Generative Ventures, is optimistic about the RWA (Real World Asset) sector, believing that its essence is to enable blockchain to account for mainstream financial assets globally. Currently, the penetration rate of this "on-chain accounting" is less than 0.1%, with significant growth potential in the future.

Jiawei, the investment principal of IOSG Ventures, stated that re-staking will be a major narrative for 2024, with the potential peak arriving in 2025 as AVS launches one after another. In addition, ZK-related projects (such as RiscZero and hardware-accelerated Ingonyama) will gradually demonstrate market potential.

Ryze Labs research analyst Allen is optimistic about AI Agent, believing it has great potential in handling massive market data, optimizing DeFi mechanisms, and asset management.

The PayFi track has attracted the attention of multiple institutions. Jsquare partner Dinghan predicts that projects that bridge traditional finance and encryption, such as Layer 2 solutions and stablecoin issuers, will receive widespread attention. Payment protocols that can be deeply integrated with mainstream services and facilitate the conversion of encryption to fiat currency will become a key force in promoting the integration of encryption into daily life.

The integration of AI and blockchain is seen as an important development direction. Dinghan stated that decentralized AI infrastructure and AI agents are rapidly emerging, and projects that build decentralized AI networks or AI-driven applications are expected to become new highlights in the industry.

Breakthrough for Large-Scale Applications

James Wo, the founder and CEO of DFG, believes that verticals like DePIN are attracting Web2 users. He predicts that the payment sector may become the next area driving mass adoption, with efficient encryption payment and fiat settlement solutions propelling a new wave of users.

Zeke, the investment research manager at YBB Capital, is optimistic that the payment sector will become the first track for blockchain "Mass Adoption." Stablecoins have shown their ability to surpass the efficiency of traditional banking finance in non-US dollar countries. Once a compliance framework is established, the potential of this sector is comparable to the trillion-dollar traditional payment systems of Web2.

Joanna, the founder and CEO of Jsquare, is optimistic about the "mass adoption" process next year. She believes that the Solana ecosystem has a leading advantage at the retail level and has high hopes for Pudgy Penguins in her investment portfolio.

Wallfacer Labs CEO Ryan Rodenbaugh believes that new front-end user experiences and embedded DeFi experiences will drive large-scale application breakthroughs, making it easier for less experienced users to start using DeFi.

Bull Market Phase Judgment

Zeke, the investment research manager at YBB Capital, believes that we may be in the mid-stage of a bull market. The approval of Bitcoin ETFs means that Bitcoin will be incorporated into a regulatory framework, which will reduce market price volatility, making it difficult to see a significant decline in the short term. The market may shift from rapid bear and bull phases to a long-term slow bull.

James Wo, the founder and CEO of DFG, stated that we may be in the "optimistic phase" of the market cycle. The return of the Trump administration will promote a more favorable encryption regulatory environment, and the proposal for Bitcoin strategic reserves will further boost market confidence. He believes that it is unlikely for a market crash like in 2022 to occur in the future, as the encryption environment has improved and developed.

Nemo, the Investment Director of Web3.com Ventures, believes that in the short term, Bitcoin has completed at least half of its bull market process. He stated that the essence of Bitcoin is to combat inflation and protect wealth.

Retail Investor Recommendations

Chris, co-founder of Web3Port, advises retail investors to focus on high-certainty sectors, with an emphasis on BTC, meme coins, and AI narrative sectors, while being cautious with investments in old altcoins that lack new narrative support. One should learn to go with the flow, understand market trends, and keep up with hotspots and points of attention.

Ryze Labs research analyst Allen reminds investors that bull markets are, in fact, the main reason most people lose money. He suggests preparing a sum of money that would not affect your current lifestyle even if completely lost, and withdrawing the costs at the right time to ensure that the funds remaining in the market are all profits. The most taboo practice is to constantly increase the principal and use leverage.

Zeke, the investment research manager at YBB Capital, pointed out that the market changes in 2025 will be more complex than in previous years, and the overall investment strategy needs to be more robust. He emphasized that investment trading is a practice; one should first cultivate internally before learning externally, maintaining a steady and strong core, and always prioritizing risk.

Jsquare partner Dinghan advises retail investors to prioritize risk management. For those seeking passive investments, blue-chip assets like Bitcoin and Ethereum are often safer choices. For more actively engaged investors, using hardware wallets and trusted security tools is crucial. Focus on high-quality, sustainable projects rather than chasing short-term trends.