What Lies Ahead for Crypto in 2025
The crypto sector has made remarkable strides in rebuilding trust and maturing as a financial and technological ecosystem in 2024. The approval and successful launch of spot Bitcoin ETFs marked a historic milestone, finally providing traditional institutions with familiar vehicles for crypto exposure. This institutional embrace, coupled with a notably more constructive U.S. regulatory environment, has substantially reduced entry barriers for allocators considering exposure to the space.
The presidential election cycle catalyzed Bitcoin's historic breakthrough above $100,000, while Solana's remarkable resurgence transformed the traditional Bitcoin-Ethereum duopoly into a dynamic three-way competition for market dominance.
We observed compelling evidence of product-market fit across multiple verticals in 2024. Stablecoins solidified their position as crypto's killer application, processing $30 trillion in transaction volume in 2024 and seeing rapid adoption in emerging markets for payments and remittances. Beyond financial infrastructure, we saw strong user growth in consumer applications: prediction markets like Polymarket achieved sustained user engagement with over 50,000 monthly active users, while derivatives platforms such as Hyperliquid surpassed $2 billion in monthly trading volume. The integration of crypto functionality into mainstream communication platforms, particularly through Telegram mini-apps, demonstrated the potential for seamless blockchain adoption by established user bases. While meme tokens drove retail participation, the Decentralized Physical Infrastructure (DePIN) sector emerged as the year's standout performer, more than doubling its market capitalization to $8.4 billion and demonstrating tangible utility through decentralized wireless networks, computing resources, and sensor systems.
The regulatory landscape has also shifted significantly in favor of innovation. The U.S. policy outlook for cryptocurrency has reached an inflection point, with potential implementation of pro-crypto campaign promises by the incoming administration presenting substantial upside for the industry. While we remain cognizant of potential risks – including possible shifts in regulatory sentiment and delays in passing comprehensive crypto legislation – we believe the foundational conditions for sustained growth are stronger than ever before.
Secular Themes: The AI Revolution in Crypto
We believe we are witnessing a transformative convergence where artificial intelligence will catalyze the next evolutionary leap in blockchain technology. Three fundamental themes are emerging that will reshape our industry:
AI-Driven Software Development Revolution
The democratization of software development through AI represents the most profound shift in our industry. This is particularly significant as engineering talent has historically constrained innovation in the cryptocurrency sector. We anticipate several paradigm shifts:
Democratized Development: AI-powered tools will dramatically reduce project launch costs from millions to tens of thousands of dollars, enabling a shift from traditional venture-backed launches to self-financed projects, following successful models like Hyperliquid and Jupiter. Open-source approaches, such as those from DeepSeek and Llama, will foster a collaborative ecosystem, encouraging developers to build, iterate, and innovate at an unprecedented pace
Security Enhancement: AI is poised to revolutionize blockchain security by enabling advanced static analysis, specialized models fine-tuned for blockchain codebases, automated security auditing, and reinforcement learning systems trained in adversarial environments. The availability of open-source models will empower the community to drive continuous improvements and rapid experimentation, fostering the development of more resilient and secure blockchain infrastructures
Development Acceleration: The significant reduction in software development costs is set to spark an era of on-chain innovation and experimentation, fueling a renaissance in blockchain development. Currently, DeepSeek's R1 reasoning model stands at the forefront of this movement by offering an open source framework that not only rivals but is increasingly catching up to traditional closed source capabilities. By democratizing access to advanced AI tools, developers are empowered to innovate without constraints, accelerating product iterations and unlocking novel applications that were once limited by technical complexity
AI as the New Crypto Interface Layer
Historical technology adoption cycles demonstrate that breakthrough technologies require appropriate interface layers to achieve mainstream adoption. We believe AI will serve as this crucial interface layer for cryptocurrency adoption:
Natural Language Interaction: AI will abstract away technical complexities, enabling intuitive interfaces for cryptocurrency transactions and DeFi operations
Streamlined User Experience: AI assistants will eliminate key friction points in onboarding, transaction execution, protocol discovery, and risk assessment
By 2030, we envision a landscape where blockchain technology becomes an invisible yet integral part of everyday digital interactions. This evolution will shift the focus from "crypto-native" applications—where users are acutely aware of the underlying blockchain—to "blockchain-enabled" solutions that leverage blockchain infrastructure to enhance performance, security, and trust, all without demanding user attention. In this future, blockchain will underpin a wide array of services and platforms, seamlessly integrated into the fabric of digital life, driving innovation and efficiency while remaining largely hidden from the end-user experience.
The Rise of AI Agents
The emergence of autonomous AI agents is reshaping blockchain interaction patterns. This ecosystem is evolving across several dimensions:
Infrastructure Layer: New platforms are emerging to support AI agents through dedicated infrastructure, open-source frameworks, advanced security measures, and specialized platforms for agent collaboration
Economic Autonomy: AI agents are becoming independent economic participants, owning wallets, generating revenue, and participating in complex market activities
Real-World Integration: Agents are finding practical applications in social media management, market analysis, content creation, and cross-chain operations
Our Industry Outlook in 2025
As we look ahead to 2025, we see several transformative trends that we believe will reshape the cryptocurrency landscape and create unprecedented investment opportunities. Our analysis focuses on key areas where we see the most significant potential for growth and innovation.
AI x Crypto Convergence
The convergence of AI and cryptocurrency represents our most compelling investment theme. As AI reshapes the digital economy, we see blockchain networks emerging as critical infrastructure for preserving user autonomy and enabling new forms of value creation in an AI-first world.
First, blockchain networks are becoming essential infrastructure for managing and monetizing AI interactions. As AI systems increasingly generate and summarize content, traditional internet business models based on ad revenue and click-through traffic are being disrupted. Blockchain protocols enable new ownership models and economic frameworks for creators, allowing them to maintain control over how AI systems use their work and capture value from AI-driven interactions. The AI agent ecosystem has already reached a $18 billion market capitalization and shows potential for further expansion as these infrastructure layers mature. Platforms like Eliza and Virtuals, where AI agents now account for over 12% of trading volume, demonstrate this trend in action.The emergence of "agent swarms" – interconnected networks of AI agents working in concert – represents a paradigm shift in how we think about autonomous financial systems. By the end of 2025, we expect AI agents to handle the majority of routine trading and DeFi operations, creating new markets for agent-to-agent commerce and specialized AI services.
Second, we're witnessing the emergence of "proof of intelligence" and "proof of humanity" systems that address key challenges in an AI-dominated internet. These systems enable blockchain networks to create tamper-resistant records of digital content, verify human versus AI actors, and establish trusted frameworks for AI-human interaction. This infrastructure is becoming crucial as deepfakes and AI-generated content make authenticity increasingly valuable in the digital economy.
Third, while major tech companies are consolidating power through AI investments, blockchain networks offer a path toward preserving the open, creative, and diverse nature of the internet. We're seeing the rise of decentralized protocols that facilitate AI capabilities without centralized control - from specialized model marketplaces to training data exchanges. These systems provide alternatives to increasingly closed AI ecosystems, ensuring innovation remains accessible to a broader range of participants rather than concentrated in the hands of a few tech giants.
Bitcoin Ecosystem
Bitcoin's ecosystem is experiencing a renaissance, challenging conventional narratives. While competing with high-performance networks like Solana and Base in some areas, Bitcoin's core value as a secure, decentralized monetary network remains unmatched. Innovations like OP_CAT and BitVM promise enhanced smart contract capabilities, bolstering Bitcoin's security-first approach. We're witnessing growing interest in its utility layer, with the Lightning Network facilitating over $328 million in fast, cheap transactions, and Bitcoin-native DeFi on Stacks and Rootstock reaching $472 million in TVL. Platforms like SolvBTC, Lorenzo Protocol, Nomic, and Interlay are further expanding Bitcoin's yield-bearing, liquid staking, and interoperability capabilities. Projects like Lombard are unlocking Bitcoin's liquidity through non-custodial lending. In the Bitcoin staking space, StakeStone is emerging as a leading omnichain LST protocol focused on integrating native Bitcoin staking, while Bedrock, developed by RockX, offers an institutional-grade, non-custodial Bitcoin liquid staking solution designed for secure and transparent yield generation. Anticipation surrounds Babylon Chain's upcoming launch, which aims to introduce Bitcoin staking, potentially creating new avenues for securing other chains and generating yield. While bridged BTC highlights Bitcoin's role as a reserve asset, the growth of these native solutions and projects like Babylon, Lombard, Lorenzo, StakeStone, and Bedrock, signals a burgeoning ecosystem focused on expanding Bitcoin's functionality without compromising its core principles. This evolution suggests Bitcoin is increasingly used beyond a store of value, laying the groundwork for a more robust and multifaceted financial ecosystem built on its secure foundation.
DeFi Evolution and DeFAI
The DeFi landscape is on the cusp of what we believe will be its most transformative phase yet, driven by the emergence of DeFAI - the fusion of DeFi and AI technologies. While previous DeFi iterations brought financial primitives on-chain and introduced complex yield strategies, DeFAI represents a fundamental reimagining of how users interact with decentralized finance. We see this evolution occurring across three key verticals: AI-powered abstraction layers that enable natural language interactions with DeFi protocols, autonomous trading agents that democratize sophisticated trading strategies, and AI-native applications that optimize everything from risk management to liquidity provision.
What makes DeFAI particularly compelling is its potential to solve DeFi's longstanding accessibility challenges. Early platforms like Griffain and Orbit are already demonstrating how AI can simplify complex DeFi operations into intuitive commands, while projects like Almanak are delivering institutional-grade quant AI agents to retail users. We predict that by the end of 2025, the majority of new DeFi users will interact with protocols primarily through AI-powered interfaces, driving a new wave of adoption that could eclipse the DeFi Summer of 2020.
Ethereum Resurgence
As DeFi continues to evolve and embrace AI innovation, Ethereum's position as DeFi's foundational layer grows increasingly critical. While Ethereum may not compete directly with Bitcoin as a store of value or with Solana on pure performance metrics, its robust censorship resistance, established network effects, and unmatched DeFi ecosystem make it uniquely positioned in the market. The platform hosts over 65% of all DeFi TVL and remains the primary hub for financial innovation in crypto.
The upcoming Pectra upgrade, expected in 2025, focuses on scaling, security, and validator efficiency – critical improvements that will enhance Ethereum's capacity to support the next generation of DeFi applications. Additionally, Ethereum's strong emphasis on decentralization and security has proven particularly attractive to institutional players building DeFi infrastructure, with major financial institutions choosing to build on Ethereum despite the availability of faster alternatives.
We expect Ethereum's role in DeFi to strengthen further in 2025, particularly as institutional adoption accelerates and regulatory clarity emerges. The network's combination of programmability, security, and liquidity creates a compelling foundation for both traditional finance integration and DeFAI innovation.
MEV and Market Structure
The MEV landscape is being transformed through intent-based architectures and chain abstraction layers. Traditional MEV extraction is being reshaped by protocols like CoWSwap and Symmetrical, which decouple user intent from execution, allowing for optimal execution across fragmented liquidity pools while protecting users from predatory MEV extraction.
We predict that by late 2025, the majority of DEX volume will flow through intent-based systems, effectively democratizing access to optimal execution. Chain abstraction layers will further revolutionize this space by allowing users to express complex, multi-step transactions across multiple chains as simple, atomic intents. This shift will not only mitigate traditional MEV but also create new opportunities for value creation through cooperative MEV strategies.
Stablecoin Innovation
The stablecoin market is evolving into the backbone of digital finance. With culmulative transaction volumes reaching $20 trillion in 2024 according to Circle, we project the total stablecoin market cap to exceed $400 billion by the end of 2025. This growth will be driven not just by trading demand, but by mainstream adoption of stablecoins for payments, remittances, and treasury operations. The entry of traditional financial institutions into this space – exemplified by Stripe's $1.1 billion acquisition of Bridge – signals the beginning of a broader institutional embrace of digital assets. We expect to see at least ten major stablecoin launches backed by traditional finance partnerships in 2025, alongside innovative products like yield-bearing stablecoins and tokenized Treasury-backed assets.
Infrastructure Innovation and Technical Edge
Our core differentiator lies in identifying and backing founders who deeply understand advanced cryptographic primitives and can leverage them to enable the transformative trends discussed above. We believe the next wave of crypto innovation will be built on sophisticated cryptographic foundations that make previously impossible applications possible.
Zero-knowledge proofs (ZKPs) continue their march toward mainstream adoption, already enabling scalable privacy-preserving solutions and underpinning many of the scaling and AI integration trends we've highlighted. Beyond ZKPs, we're particularly focused on emerging cryptographic technologies that will form the backbone of next-generation crypto infrastructure:
Fully Homomorphic Encryption (FHE): Supporting projects that enable computation on encrypted data, critical for privacy-preserving AI applications and confidential DeFi
Multi-Party Computation (MPC): Backing teams exploring new financial primitives through MPC, particularly in institutional-grade key management and cross-chain bridges
Trusted Execution Environments (TEE) and Functional Encryption (FE): Investing in novel approaches to privacy and security that enable controlled data access and verifiable computation
We seek founders who don't just understand these technologies at a theoretical level, but can apply them practically to unlock new possibilities in areas like AI agent coordination, cross-chain infrastructure, and institutional DeFi adoption.
Risk Assessment and Market Considerations
While maintaining our optimistic outlook on the transformative potential of crypto technologies, we believe it's crucial to acknowledge and prepare for several macroeconomic and market-specific risks that could impact our sector in 2025:
Macroeconomic Headwinds
The broader financial markets face significant uncertainties around inflation and interest rates. The anticipated Trump tax cuts, potentially injecting $400 billion of stimulus into the economy, could reignite inflationary pressures. If the government fails to implement offsetting spending cuts, we could see the 10-year Treasury yield push toward 5.25% or higher. Such a scenario would likely create headwinds for risk assets, including crypto markets.
AI Investment Cycles
The unprecedented capital expenditure in AI infrastructure by major tech companies presents both opportunities and risks for our sector. While we're excited about AI-crypto convergence, we remain mindful of potential parallels to historical tech investment cycles, such as the telecom buildout of the 2000s. The success of our AI-related thesis depends partly on these investments generating sustainable returns rather than becoming defensive capital deployment.
Regulatory and Political Uncertainty
While the regulatory environment has improved, the presidential transition period introduces significant policy uncertainties. The incoming Trump administration's stated pro-crypto positions could accelerate institutional adoption, particularly through potential Bitcoin ETF expansion and regulatory clarity. However, this optimistic scenario must be balanced against other geopolitical factors that could impact our sector. Rising U.S.-China tensions could affect crypto mining operations and supply chains, while increasingly assertive technological sovereignty initiatives in Europe and Asia may lead to regulatory fragmentation across jurisdictions. Implementation of pro-crypto campaign promises may face delays or modifications as the administration balances competing priorities, particularly given the complex interplay between crypto policy, national security concerns, and international financial regulations. We must remain prepared for potential shifts in regulatory sentiment, especially if market volatility or macroeconomic stress triggers increased scrutiny of the sector.
Technical and Security Considerations
As AI agents become more prevalent in crypto markets, new attack vectors and security considerations emerge. We're particularly focused on potential risks around AI-driven market manipulation and smart contract vulnerabilities in AI-integrated protocols, and the challenges of securing AI agent infrastructure.
Look Ahead
Looking ahead, we believe the crypto ecosystem is entering its most consequential phase. The winners in this next phase will be teams that combine deep technical expertise in cryptographic primitives with practical applications that resonate with both crypto natives and traditional institutions.
The combination of AI integration, improved infrastructure, and institutional participation creates an unprecedented opportunity for the industry to deliver on its promise of a more open, efficient financial system. We believe 2025 will be remembered as the year when cryptocurrency moved beyond speculation to become an integral part of the global financial infrastructure.