The cryptocurrency industry is grappling with a significant downturn in venture capital (VC) funding, as revealed by recent data from the crypto analytics platform RootData. In May 2025, the number of completed VC deals in the crypto sector plummeted to just 62 funding rounds, marking the lowest monthly total since January 2021. This sharp decline signals a growing caution among investors amid ongoing market volatility and macroeconomic uncertainties.
Despite the overall drop in deal volume, certain segments of the crypto industry continue to attract interest. Infrastructure projects, such as those focused on exchanges and custodians, remain a priority for some venture capitalists. Analysts suggest that these essential services are seen as more stable investments compared to speculative token projects, which have faced increased scrutiny in recent years.
The funding struggles come on the heels of a broader trend of declining VC investment in crypto, with a 31.3% drop reported in Q3 2024, according to PitchBook data cited by Bloomberg. This downturn, which saw investment fall to $1.7 billion, reflects broader concerns about a potential U.S. recession and the inherent volatility of digital assets, causing investors to adopt a more risk-averse stance.
Critics of VC involvement in blockchain and crypto have also raised alarms about the structure of some deals. Recent opinions published on platforms like CoinDesk highlight concerns over Ponzi-like schemes, where deals are designed for quick exits rather than sustainable revenue models. This has led to calls for greater transparency and accountability in how VC funds are allocated in the space.
The impact of reduced funding is already being felt by many early-stage crypto startups, which rely heavily on VC backing to scale operations and develop innovative solutions. Without sufficient capital, these companies face the risk of stagnation or collapse, potentially slowing the overall growth of the blockchain ecosystem.
As the crypto industry navigates these challenges, experts remain cautiously optimistic. While the current funding environment poses significant hurdles, the resilience of key sectors and the potential for regulatory clarity could pave the way for a future recovery. For now, stakeholders are closely monitoring market trends and investor sentiment to gauge the next steps for VC-backed crypto ventures.
Maria Lourdes
