After the post-Luna, post-FTX cleanup in the previous bear cycle at 2022–2023, many in the industry quietly hoped (including myself) that 2025 would mark a return to the familiar pattern — a four-year cycle tied to the Bitcoin halving. Halving event, a rising macro tide, a friendlier risk environment, and another wave of narrative-driven crypto euphoria 12–18 months after the halving.
Instead, something more interesting and less predictable happened.
Capital came back, but very selectively. It went into fewer deals, later stages, and proven ventures with battle-tested business models. It stopped chasing idea-stage projects with whitepapers and started rewarding startups that combined infrastructure, regulatory clarity, real distribution, and real traction. In short, venture capital in crypto began behaving like venture capital, not speculative momentum capital.
Venture Investment into Crypto Startups in 2025: Capital Returned, Discipline Stayed
In Q2 2025, venture investment into crypto and blockchain startups jumped to around $10 billion across 528 deals, more than double the capital deployed in Q1 and an 18% rise in deal count. But by Q3, that figure had decreased to about $4.6 billion across 414 deals, with over half of all capital flowing into later-stage rounds.
The cyclicality is obvious. The market is still willing to fund crypto — just not anything and not at any price.
From my personal view as an investor, advisor, and board-level participant (through my work with Cryptexus, a crypto advisory firm that engages with dozens of startups every year), 2025 did not look like a classic bull cycle. It looked like a filtering mechanism. The year separated products from narratives, and that filter will determine what gets funded in 2026.
2025 as a Selective Venture Capital Market
Venture capital news vs reality on the ground
On the surface, the broader venture capital market looked healthy. According to KPMG, global VC investment reached around $120 billion in Q3 2025, marking the fourth consecutive quarter of rising deal value.
Yet within that growth, crypto and blockchain funding behaved very differently.
Deals became fewer in number, much larger in average size, and more heavily concentrated in later-stage, infrastructure-heavy businesses. According to multiple Q3 reviews, roughly 56% of crypto VC capital in 2025 went to late-stage rounds, rather than the spray-and-pray seed model that defined 2021 and earlier cycles.
What is venture capital — and why retail collapse mattered
The most under-discussed reason for this shift sits outside institutional markets.
2025 saw a near-complete collapse of retail participation, largely triggered by the explosion of pump.fun and similar platforms. These ultra-frictionless memecoin generators created a hyper-speculative environment in which thousands of tokens were launched on a daily basis, most designed to fail within hours. Retail investors absorbed the majority of these losses, and that’s why the retail liquidity pool effectively evaporated.
As a result, the force that fueled the 2017 and 2021 cycles was close to zero in 2025.
With retail capital gone, founders could no longer rely on narrative cycles, viral tokens, or community-driven momentum to push early-stage valuations. Institutional venture capital became the only meaningful liquidity source — and institutions do not deploy based on memes, momentum, or “the next big chain.”
They deploy based on regulation, revenue, risk posture, and distribution.
Venture capital vs private equity: crypto found a new middle ground
At the same time, a parallel trend played out across the entire tech sector: AI dominated general venture attention, absorbing an outsized share of speculative capital.
In 2021, it was often enough to say, “we’re early in a new narrative.” In 2025, that no longer opened doors. Investors didn’t want promises of future token appreciation.
All of this produced a clear outcome: 2025 still funded crypto, but it funded crypto as financial and data infrastructure, not as a speculative playground. That structural shift toward regulated, revenue-bearing models is the main reason 2025 matters for startup investing in 2026.
Regulation as a Venture-Level Competitive Edge
The other defining feature of 2025 was regulation.
Multiple jurisdictions advanced specific stablecoin frameworks, and financial institutions in roughly 80% of major markets announced new digital asset initiatives in 2025.
For founders, this changed the perception. Regulation stopped being something you “deal with later” and became part of the product architecture at the earliest stage of the business. For investors and boards, regulatory posture turned into a screening tool. If a team still talked about “figuring out compliance once we scale,” the conversation often ended immediately. In my work with Cryptexus and as CEO of Hexagon Ventures Group, I saw this shift up close.
In 2025 alone, Cryptexus supported five crypto companies applying for licensing in Europe — preparing regulatory documentation, advising on governance, and helping teams meet supervisory expectations. Working alongside these teams made one thing clear: regulatory clarity is no longer a nice-to-have; it is foundational for raising venture capital.
Startups that attracted serious funding in 2025 were not the ones with the most creative token models. That regulation-first mindset will matter even more in 2026.
Product Directions That Attracted VC Investment in 2025
Stablecoins and “boring” crypto payments infrastructure
If there is one category where crypto quietly became mainstream in 2025, it is stablecoins.
TRM Labs estimates that stablecoins accounted for roughly 30% of all crypto transaction volume between January and July 2025. Over the same period, USDT’s market cap climbed from about $140 billion to $175 billion, while USDC grew from roughly $43.7 billion to $73.4 billion — a 25% and 68% increase respectively.
The European Central Bank noted that global stablecoin capitalization reached new all-time highs in late 2025, enough to raise explicit financial stability questions inside the euro area. That alone says more about real-world adoption than any “crypto is dead” headline.
On the ground, this translated into a clear venture funding pattern. Startups building cross-border payout systems, merchant settlement layers, working-capital tools, and treasury infrastructure based on stablecoins found real demand — not only in emerging markets, but also across the US and Western Europe.
Real-world assets: from narrative to balance sheet
Real-world asset tokenization moved from buzzword to must-do status in 2025.
According to multiple industry trackers, the tokenized RWA market expanded from roughly $8.6 billion to over $23 billion in six months, a 260% surge. Private credit represented about 58% of the total, with tokenized US Treasuries accounting for roughly 34%.
This growth did not come from “tokenize everything” dreams. It came from specific use cases: structured credit, short-term debt, regulated funds, and institutional products where the token acts as an operational wrapper, not the core value proposition. This trend extends beyond government adoption, with hundreds of RWA platforms focusing on real estate, commodities, and carbon credits.
Privacy infrastructure and the return of Zcash
Alongside stronger compliance frameworks, 2025 marked renewed interest in privacy infrastructure.
As travel-rule enforcement advanced and KYT systems became more sophisticated, institutions encountered a practical issue: full public blockchain transparency exposes sensitive corporate data — treasury flows, counterparties, and commercial strategy.
This led to renewed interest in privacy-preserving technologies. Zcash, previously seen as niche, gained relevance because it combines strong cryptography with selective disclosure. Modern zero-knowledge tools now allow transactions to remain shielded while still enabling regulatory access when legally required.
The lesson from 2025 is clear: privacy is no longer a counter-narrative if as it works alongside regulation. It is becoming a required layer of functional digital finance.
Where Venture Capital is Likely to Move, or Where to Invest in 2026
1. Stablecoin-based financial services
Between transaction share, market-cap growth, and the fact that over 70% of major jurisdictions focused regulatory work on stablecoins in 2025, they are no longer peripheral.
Clear regulation — including the GENIUS Act in the US and the EMT framework under MiCAR in the EU — creates a straight road for businesses building large-scale stablecoin infrastructure.
2. RWA with institutional-grade credibility
Tokenization is moving from experimentation to the policy agenda. Multiple reports now frame RWA as a foundational component of the emerging digital financial system, particularly in real estate, private credit, and fund structures.
In 2026, investors will not be impressed by “RWA” on a slide. They will look for boring details: who actually owns the underlying asset, which regulator supervises the structure, what the redemption waterfall looks like in stress scenarios, and who the end buyers are beyond crypto-native wallets. Teams that cannot answer those questions will find capital harder to access, whatever the narrative.
3. Regulated crypto-native banking
The highest-barrier but highest-opportunity is regulated crypto-native banking: institutions that combine custody, fiat access, stablecoin issuance or integration, treasury services, and compliance into a single, supervised stack. Early moves by banks and fintechs launching their own stablecoins and tokenized deposits in 2025 are just the start.
This space requires capital, patience, and uncomfortable amounts of work with regulators. It is not for everyone. But for investors and founders who understand licensing, ris,k and financial plumbing, it may be one of the most attractive long-term themes in the sector.
Startup Investing Priorities for Founders in 2026
For founders, 2025 should remove any remaining illusions.
First, revenue and regulatory readiness will beat clever tokenomics. Investors have enough data to know that narratives without business models do not last. The teams who raise in 2026 will arrive with actual customers, or at least with a realistic plan for who pays and why.
Second, jurisdictional strategy is no longer optional. Regulation is fragmenting along national lines even as it converges on the need for control. A founder who cannot explain where their entity will be licensed, which framework it will operate under, and how that interacts with their users is taking unnecessary execution risk.
Third, distribution will be really important. A technically elegant protocol without access to SMEs, corporates, payment providers, or financial institutions will have a hard time defending its place. Conversely, an average product with strong distribution partners and licenses may attract more capital than another technically impressive but isolated chain.
VC Investment Priorities Heading into 2026
For investors, 2026 will be less about token upside and more about risk-adjusted resilience. The questions change accordingly.
The questions shift from “how big could this token be?” to:
- What is the firm’s regulatory advantage?
- Who provides banking and settlement?
- How much revenue comes from real demand?
A growing part of my work at Hexagon Ventures Group and Cryptexus is helping founders build companies that can withstand more than one market cycle. This means establishing the right governance, regulatory foundations, and risk structure from the start. The rising demand for this type of guidance is itself a clear signal of where the industry is heading.
2026: Between Venture Discipline and Crypto Structure
Looking back, the pattern seems to be clear. The years 2021-2022 rewarded narratives and cheap liquidity. The years 2023-2024 punished the ones who chased hype and wrong narratives. The year 2025 quietly rewarded infrastructure, compliance and cash-flow.
2026 will push that logic further. Blockchain as technology and crypto is not disappearing; it is becoming an essential part of payments, tokenisation of assets and decentralized internet. The teams that focus on regulated structures, strong partners and real problem-solving products will be the ones that succeed over the next cycle and beyond. The ones that still bet on outdated narratives, probably, will not.
