VCs seem to be prioritizing real-world use cases like DePINs and RWAs. While overall deal count declined in late 2024, total investment volume rebounded. Web3 was still the dominant sector for VC funding after attracting $2.1 billion, followed by blockchain infrastructure and developer tools. Meanwhile, Klarna CEO Sebastian Siemiatkowskia shifted toward crypto integration despite his past skepticism.
VC Focus Shifts to Real World Use Cases
Venture capital firms are still optimistic about cryptocurrency and blockchain startups in 2025, though they are becoming increasingly selective in their funding decisions. Investors are now prioritizing projects that offer real-world use cases capable of bridging the gap between Web2 and Web3.
According to Xiao Xiao, a venture investments partner at the Hong Kong-based HashKey Capital, the firm is focusing more on key sectors like decentralized finance, gaming, stablecoins, and artificial intelligence. However, HashKey is particularly bullish on decentralized physical infrastructure networks (DePINs) and the tokenization of real-world assets (RWAs). These sectors are seen as critical components in connecting traditional industries to blockchain technology.
DePINs use blockchain to integrate physical infrastructure with digital networks, and currently hold a market cap of close to $20 billion. In 2024, the sector raised more than $350 million across pre-seed, seed, and Series A funding rounds, which certainly proves that there is investor interest.
DePIN market cap (Source: DePIN Scan)
RWAs, on the other hand, reached a cumulative value of $17.2 billion, with financial tokenization in areas like private credit and US Treasury debt emerging as key use cases. These developments fueled a lot of venture capital interest, which was the case in projects like Hamilton Treasury, which recently secured funding to facilitate the integration of traditional financial assets with the Bitcoin network.
Despite strong investor sentiment, the selection process for allocating capital has become more challenging because of the growing number and diversity of crypto ventures. While fundraising for HashKey has been relatively smooth, Xiao shared that choosing the right projects has become more difficult. Even traditionally cautious investors are now looking for exposure to digital assets.
The global regulatory landscape is also playing a role in shaping investment trends. While HashKey operates primarily in Asia, Xiao acknowledged that the outcome of the US presidential election and developments in Silicon Valley have a global impact. The return of Donald Trump to office could act as a catalyst for accelerating crypto regulation, which, in turn, may stimulate more activity in Asian markets.
Projections also indicate a rise in venture capital deal activity throughout 2025. PitchBook estimates that crypto funding will increase to $18 billion, up from the $13.6 billion that was seen in 2024. Galaxy Research attributes this expected growth to declining interest rates and greater regulatory clarity in the US.
Projected 2025 VC investments (Source: Galaxy Research)
One of the more noticeable shifts in venture capital strategy is the growing preference for consumer-facing projects over infrastructure-focused ones. According to Xiao, this trend means that the market is maturing to a point where early-stage teams can now develop applications much more efficiently by taking advantage of existing blockchain infrastructure and advancements in artificial intelligence.
Fewer Crypto Deals but Bigger Investments
Despite the excitement surrounding 2025’s crypto VC potential, the number of venture capital deals saw a sharp decline in the fourth quarter of 2024 as investors became a lot more selective in their funding decisions.
According to PitchBook’s Crypto VC Trends report, the total deal count in the first quarter of 2024 stood at 653, but the number steadily declined throughout the year, dropping to 351 by Q4. This is a 46% decrease from the beginning of the year.
Despite the drop in deal count, total investment volume still showed resilience in the final quarter. Crypto venture capital funding reached $2.7 billion in Q1 before experiencing declines in the second and third quarters. However, Q4 saw a recovery, with investment volume rising to $2.6 billion, which is a 13% increase from the previous quarter. PitchBook analysts pointed out that while the rebound in funding indicated continued investor confidence in established teams and innovative technologies, the steady decline in deal count pointed to an increasingly selective investment landscape. This trend first became especially clear in the third quarter and continued through year-end.
Crypto VC deal activity (Source: PitchBook)
When looking at the bigger picture, overall VC activity in 2024 stayed relatively on par with 2023, though both years still lagged behind 2022. The shift in investor sentiment means that capital allocation is becoming more strategic and focused on projects with long-term potential.
Among the various sectors receiving venture capital in 2024, Web3 was the dominant category. This sector consists of decentralized communities, metaverse and gaming projects, non-fungible token platforms, and AI-integrated crypto initiatives, and it attracted the highest amount of funding throughout the year. In the fourth quarter alone, Web3 projects secured more than $800 million in investments. On Oct. 15, Praxis announced that it received a $525 million funding pledge, making it one of the largest single investments of the year.
VC deals by segment for 2024(Source: PitchBook)
Over the course of 2024, the Web3 sector secured a total of $2.1 billion across 142 deals, which made it the leading recipient of venture capital. Blockchain networks, including projects focused on bridges, interoperability, and layer-1 and layer-2 solutions, followed closely behind with $1.8 billion spread across 106 deals. Infrastructure and developer tools, like data storage solutions, development platforms, institutional services, and node and validator management, ranked third with $1.7 billion in 125 deals.
The access sector, which includes asset management platforms, exchanges, wallets, research, and data tools, saw $1 billion in funding across 70 deals. Meanwhile, decentralized finance projects managed to secure $714 million in 80 deals.
Klarna CEO Embraces Crypto
Meanwhile, Swedish payments giant Klarna Bank AB is planning a shift toward cryptocurrency as it prepares for a potential US initial public offering. CEO Sebastian Siemiatkowski shared his interest in embracing crypto in a Feb. 8 post, and invited suggestions from industry leaders. Klarna processes around $100 billion in annual trading volume,and has yet to integrate cryptocurrency services.
After his announcement, industry figures responded with proposals. Circle CEO Jamie Allaire suggested integrating the USD Coin (USDC) stablecoin, while Immutable’s Robbie Ferguson pointed out the potential for buy-now-pay-later services in the $150 billion gaming market. PayPal already introduced its own stablecoin, PayPal USD, which reached a $583 million market cap, while Revolut offers 175 crypto tokens with very competitive trading fees.
Siemiatkowski’s recent enthusiasm for crypto is a big departure from his past skepticism. In late 2022, he dismissed Bitcoin as a “decentralized Ponzi scheme” and criticized transaction fees in the industry. In 2021, he also admitted to lacking an understanding of blockchain and crypto mining, and questioned how Bitcoin could function once all 21 million coins were mined.
Despite his previous doubts, he seems to be engaging more actively with the space, and even recently shared an AI-generated song called “Crypto Boy” on Feb. 10.
