Q1 2025 proved that crypto no longer operates in a vacuum. The market correction – where total crypto market cap dropped from $3.4 trillion to $2.8 trillion – mirrored broader macro turbulence, including a 4.6% decline in the S&P 500 and a 10.4% slide in the Nasdaq. These moves were driven less by protocol fundamentals and more by a shift in geopolitical risk, as the new U.S. administration’s tougher trade stance tightened global liquidity.

Still, underlying momentum in crypto infrastructure remained resilient. Stablecoin circulation jumped by $25 billion to $227.1 billion, suggesting growing confidence in dollar-denominated blockchain settlement, which continues to be crypto’s most consistent use case. We expect near-term VC interest to shift toward startups in payments, remittance, and treasury management that monetize stablecoin velocity.

The $1.4 billion Bybit hack—the largest ever—highlighted urgent infrastructure needs, particularly around custody, proof-of-reserves, and key management. Startups building in these areas may benefit from an improved funding climate, even as valuations across the board remain under pressure.

Meanwhile, retail speculation cooled. Memecoin volumes on Solana dropped sharply, prompting liquidity migration to other chains offering higher yields. This trend is likely cyclical, not permanent.

All eyes now turn to Circle’s upcoming IPO. If it prices above its rumored $4-$5 billion range, it could reset valuation benchmarks and re-open late-stage capital flows.

In sum, Q1 marked a healthy consolidation. The market rotated away from hype and toward fundamentals, rewarding investors and founders focused on real traction and long-term utility.

End Notes

Source: https://files.pitchbook.com/website/files/pdf/Q1_2025_Crypto_VC_Trends_Preview.pdf