Venture capital is the driving force of the startup world in Web3 and cryptocurrencies. Entrepreneurs must raise funds for projects to hire talented people, pay operational costs, and conduct marketing to scale the business. VC funds are eager to provide such support as they can gain a share in long-term success – if it happens. Most startups fail. The business relies on unicorns that drive VC funds.
The cryptocurrency market is unique because cryptocurrencies play a significant role when many startups launch their own tokens. However, the digital assets market is not performing well. Since October, when the price of 1 BTC reached a record level of 126,000 USD, the largest cryptocurrency has fallen by 25%.
Cryptocurrency prices affect the VC market. Startups find it increasingly difficult to raise money. What are the current forecasts for the market? Stefan Deiss, CEO of Hashgraph Group, which focuses on VC in the Hedera ecosystem, notes:
“The cycle in the market can influence investor sentiment and slow down or speed up the pace of closing transactions.”
Reduced expectations from venture capital
One of the first things that happen during declines in the cryptocurrency market is a decrease in startup valuations.
It may seem unrelated, but so-called 'hot rounds' of trendy startups are cooling off. VC funds are less likely to agree to very high valuations – notes Artem Gordadze, a business angel of the NEAR Foundation and advisor at the Techstars accelerator:
“When Bitcoin reaches high values, such as the perceived level of 100,000 USD, startup valuations are also high. This creates a difficult situation: funds must justify entering at such a valuation, considering the future price that must be achieved within a specific investment horizon to generate acceptable profits.”
It seems that the theory that Bitcoin always rises does not convince venture capital. Funds have long time horizons and have experienced many cycles with Bitcoin.
In addition, many VC funds refer to November and December as 'loss months.' They do not intend to work intensively during that time – in the fourth quarter and holiday period, they prefer to wait and start investing only after the new year.
A pragmatic point of view from venture capital
From a bird's eye view of the VC market – especially in cryptocurrencies – it is clear that funds are still flowing, but the scale of transactions is smaller.
A good example is Polymarket, a predictive market that raised 1 billion USD, while Kraken raised 800 million USD in this funding round.
In the third quarter, the total financial value was 4.59 billion USD, half of which was accounted for solely by the seven largest investments. Alex Thorne, head of research at Galaxy, notes:
“Market declines sharpen investors' attention, as they stop perceiving price movements as signals. Instead, persistence in execution and product as the most important indicators matter. Declines encourage a focus on fundamentals rather than short-term momentum.”
Short-term momentum often turns out to be mere noise. Many projects backed by VCs during TGE this year have not succeeded. This includes, for example, PUMP (a drop of over 50% in 2025) and Berachain (a drop of 91% since its launch in February):
“High volatility and uncertain early valuations of startups lead to significant changes in the approach to investing. Capital flows where liquidity cycles are shorter, and control over valuations is greater.”
Lock-up period and liquidity
One of the most characteristic aspects of the cryptocurrency industry is the token generation event, or TGE. The successor to ICOs from previous years, Coinbase currently supports TGE after its purchase of the investment platform Echo for 375 million USD. Monad was the first project to debut there, raising 296 million USD. There will surely be more. However, after the token launch, venture investors must carefully track several crypto-specific indicators.
One of them is the lock-up of tokens. During TGE, not all tokens are yet in circulation. For some time, these assets are on hold. Such a mechanism better motivates network participants – from team members to airdrops for the community and foundation activities.
Another indicator is fully diluted value, or FDV. It is the number of all tokens multiplied by the price. This is the equivalent of market capitalization for all tokens, even those that are not yet unlocked.
Market fluctuations make it difficult for VCs to predict potential exits from token investments. This is a challenge.
Recently, Arthur Hayes from Maelstrom Capital criticized lock-ups, particularly those related to Monad. As a trader, Hayes dislikes the lack of liquidity with such tokens.
“Considering the average duration of rights acquisition/exclusions from 12 to 48 months, VCs must anticipate the likely state of the market after the lock-up ends. The entry price should be strategically set to ensure a profitable exit. Therefore, long-term market forecasts are crucial for finalizing deals.”
Moving on to market forecasts, VCs love to talk about the future. For cryptocurrencies, if regulations in the USA are favorable in 2025, the next year could be better. Is this just the hopes of investors?
Possible. However, VCs always look at the market through rose (or green) glasses. Optimism always prevails. Deiss notes:
“2026 is shaping up to be the year of true utility – decentralized finance will return with greater momentum and maturity, while stablecoins will take a back seat.”
This year, stablecoins indeed had their five minutes, even though they constitute a dull infrastructure that will drive, for example, the next Polymarket. This platform uses USDC on Polygon as its main coin and network. Gordadze claims:
“As stablecoins finally enter the mainstream and banks rush to participate, the next stage will be user services based on these assets, operating in the background.”
The most important areas of growth will be at the intersection of AI/Blockchain and RWA/Blockchain. These hold the chance for real impact and revenue for institutions.
To read the latest cryptocurrency market analysis from BeInCrypto, click here.
