Encryption VC Strong Rebound: Financing amount skyrocketed to $4.65 billion in Q3 2025, a quarter-on-quarter increase of 290%.

In the third quarter of 2025, the total amount of risk investment in Crypto Assets reached $4.65 billion, a staggering rise of 290% quarter-on-quarter, making it the second strongest quarter since the FTX collapse in 2022. A total of 415 transactions were completed this quarter, with the number of transactions rising by 9% compared to the previous quarter. Among them, Revolut's $1 billion financing and Kraken's $500 million investment contributed nearly one-third of the total financing amount. Data shows that the investment focus is shifting from early-stage projects to mature enterprises, with the United States continuing to lead the global market with a 47% share of financing, marking a more mature development stage for the encryption industry.

Investment Trend Analysis: Recovery Path in the Post-FTX Era

The total venture capital of $4.65 billion in the third quarter of 2025 not only achieved an astonishing rise of 290% compared to the second quarter, but also set a record for the second highest quarterly total since the fourth quarter of 2022. This data comes from the latest report released on Monday by Alex Thorn, the head of digital research at Galaxy, showing that the crypto assets venture capital market is steadily recovering from the shadow of the FTX bankruptcy. It is worth noting that despite the continuous rise in Bitcoin prices since the beginning of 2023, analysts point out that there has been no obvious correlation between venture capital inflows and asset price performance, a decoupling phenomenon that sharply contrasts with the bull markets of 2017 and 2021.

In terms of trading activity, a total of 415 investments were completed this quarter, with the number of transactions rising by 9% compared to the previous quarter, but still about 35% lower than the peak of the bull market in 2021-2022. This characteristic of “low volume but high value” indicates that investors are adopting a more concentrated investment strategy, focusing their funds on mature projects with clear business models and revenue sources. In the report, Thorn emphasized that current venture capital activity is in an “active and healthy” state, mainly benefiting from the growing market demand in areas such as stablecoins, artificial intelligence, blockchain infrastructure, and trading technologies.

From a historical perspective, this round of recovery presents structural characteristics that differ from previous cycles. Compared to the ICO boom in 2017 and the NFT frenzy in 2021, current investments place greater emphasis on actual utility and compliance frameworks, rather than mere conceptual speculation. In particular, the accelerated entry of traditional financial institutions has provided ongoing funding support for infrastructure projects such as compliant trading platforms, institutional-grade custody services, and fiat-Crypto Assets channels. This shift reflects an important trend of the Crypto Assets industry evolving from marginal innovations to mainstream financial infrastructure.

Looking ahead, the clarification of the regulatory environment may further drive the rise of venture capital funding. The upcoming “GENIUS Act” in the United States and regulations on the structure of the encryption market are expected to provide clearer regulatory guidance for the industry and reduce the investment risks brought by policy uncertainty. At the same time, the popularization of spot Bitcoin ETP and the emergence of digital asset government bond products are attracting large institutional investors such as traditional pension funds and hedge funds, creating a broader market space for crypto startups.

Fund Flow Analysis: Infrastructure and Trading Platforms Lead the Investment Track

This quarter, venture capital funding has shown a significant trend of industry concentration, with the trading platform, investment, and lending services sectors leading with a financing amount of $2.1 billion, accounting for 45% of the total financing scale. This data highlights the strong market demand for compliant and scalable financial tools against the backdrop of an evolving regulatory environment. The $1 billion funding received by UK fintech company Revolut and the $500 million infrastructure investment by exchange Kraken have become the most notable transaction cases in this field.

Infrastructure projects are also favored by capital, especially foundational technology sectors such as staking services and blockchain integration solutions. These investments reflect the industry's long-term emphasis on the robustness of underlying technologies. As mainstream networks like Ethereum transition to proof-of-stake consensus mechanisms, related node services, API interfaces, and developer tools have become key focus areas for capital allocation. Notably, institutional-grade custody service provider Erebor secured $250 million in funding, indicating a pressing demand from traditional financial institutions for digital asset custody solutions.

In emerging fields, the combination of artificial intelligence and encryption technology, as well as payment solutions, has shown remarkable performance. As the stablecoin market size surpasses $180 billion, related cross-border payment and settlement network projects have gained continuous attention, with Fnality's $135 million financing being a typical example. At the same time, tokenization, as another highlight area, has attracted a large amount of funding driven by the anticipated clarity in legislation. The U.S. Treasury's $146 million investment in tokenized assets marks the acceleration of the trend of traditional assets being brought on-chain.

In contrast, the investment enthusiasm for once-popular sectors such as Web3, NFTs, DAOs, the metaverse, and gaming has noticeably cooled. Concepts that sparked a frenzy during the last cycle with avatar NFTs (PFPs) are now undergoing a process of de-bubbling. However, early-stage investment in these areas continues, indicating that there is still innovation vitality, although investors are being more cautious, focusing more on sustainable business models and actual user needs.

Financing distribution and representative transactions in various fields

Trading and Lending Platforms: $2.1 billion (Revolut $1 billion, Kraken $500 million)

Infrastructure and Services: $830 million (Erebor $250 million, Mesh Connect $130 million)

Payment and Settlement: $281 million (Fnality $135 million, ZeroHash $104 million)

Tokenization and Asset On-chain: $146 million (Treasury project)

DeFi and Rewards Payment: $208 million

Regional Distribution Pattern: The Dominance of the United States Further Consolidated

From a geographical distribution perspective, the United States has further strengthened its leadership position in the global Crypto Assets venture capital market this quarter, attracting 47% of the world’s venture capital funding and completing 40% of the transaction volume. This data reflects the comprehensive advantages of the U.S. Crypto Assets ecosystem in terms of technology, talent, and capital, and it also demonstrates the attractiveness of a relatively clear regulatory environment for investors. The United Kingdom ranks second with 28% of the funding share, but its transaction share is only 6.8%, indicating that the UK market is more inclined towards large financing projects, such as the $1 billion investment received by Revolut, which is headquartered in London.

Singapore and Hong Kong ranked third and fourth with trading shares of 3.8% and 3.6% respectively, demonstrating the continued activity of the Asian market in the field of Crypto Assets venture capital. It is noteworthy that although Singapore's trading volume share is not high, it has attracted numerous cross-regional headquarters and R&D centers, becoming a strategic hub for the expansion of Asian Crypto Assets enterprises. After Hong Kong launched the licensing regime for virtual asset service providers in 2023, it is gradually rebuilding its status as a Crypto Assets financial hub, but tightening regulations may have some impact on short-term capital inflows.

In the European market, the Netherlands stands out with a capital share of 3.3%, mainly due to its open regulatory attitude and advantageous geographical location. European countries such as Switzerland, Germany, and France also maintain stable performance in the Crypto Assets venture capital field, but the overall scale still lags far behind the UK and the US. This regional concentration phenomenon is consistent with the overall distribution trend of technology venture capital, indicating that the development of the Crypto Assets industry still heavily relies on the support of mature technology ecosystems and financial infrastructure.

Policy factors are becoming key variables affecting regional distribution. If the proposed “GENIUS Act” in the United States and the regulations on the structure of the crypto market pass smoothly, it could further consolidate its leading position and provide institutional investors with a clearer path for participation. At the same time, the EU's MiCA (Crypto Assets Market) regulations will be fully implemented in 2025, and the unified regulatory framework is expected to enhance the overall competitiveness of the European market. The Asian region shows a differentiated trend, with Singapore remaining open, Hong Kong moderately tightening, and Japan gradually relaxing; this policy difference will continue to affect capital's regional allocation decisions.

Evolution of Investment Stages: A Clear Signal of Industry Maturity Improvement

The venture capital data for the third quarter of 2025 clearly shows the trend of the crypto industry moving towards maturity. In terms of funding stage distribution, late-stage projects received 57% of the funding, while early-stage projects accounted for only 43%, reversing the dominance of early investments seen in the 2021-2022 cycle. Notably, the number of pre-seed round transactions remained stable, but subsequent rounds saw a significant increase in activity, indicating that the focus of investment is shifting from proof of concept to scaling expansion.

The trading scale indicators also corroborate this trend. In the mid-term of this quarter, the trading scale remained at 4.5 million dollars, while the pre-financing valuation rose to a record 36 million dollars, approaching the historical high of 2021. This increase in valuation reflects both the fierce competition in the market for high-quality projects and indicates that investors are willing to pay a higher premium for mature companies with product-market fit and proof of revenue. Compared to 2023, the valuations of growth-stage companies have increased by an average of 40%, while early-stage startup valuations have only risen by 15%.

Analyzing the founding year of startups, the cohort of companies established in 2018 has the highest amount of financing. These projects, which have developed over the years, are entering an expansion phase and require substantial funding to support market expansion and technology upgrades. Meanwhile, the startups founded in 2024 have the highest number of transactions, indicating that innovative vitality continues to surge, with a new generation of projects continuously entering the market. This pattern of “old projects attracting large amounts of money, while new projects are numerous” is a typical characteristic of healthy industry development.

Yinhe Digital Sorn pointed out in the report that with traditional players accelerating the adoption of encryption technology and many venture-backed startups achieving product-market fit, the “golden age” of early-stage crypto investment may be gradually fading. This judgment is based on the continuous decline in pre-seed round trading activity, and also reflects the market's preference for predictable returns and reduced risks. However, this does not mean that innovation is hindered—on the contrary, it indicates that the industry is establishing a more sustainable development path, and innovation will shift from wild growth to meticulous cultivation.

Evolution of Investment Themes: From Concept Speculation to Practical Value

This quarter, venture capital trends have clearly shifted towards pragmatism, with investors focusing more on projects that address real problems and create immediate value. The reason why trading platforms and infrastructure have received the most funding is that they directly address the core needs of market participants—efficient and compliant access to the encryption market. Revolut's additional $1 billion investment to expand its encryption services reflects the explosive growth in demand from traditional financial platforms for digital asset integration, with its global user base of over 35 million providing a strong channel for the popularization of Crypto Assets.

Tokenization, as another key investment area, shows the acceleration of the integration of traditional finance and encryption technology. The U.S. Treasury's $146 million investment in tokenized assets is symbolic, marking the acknowledgment of sovereign institutions regarding the enhancement of financial efficiency through blockchain technology. Scenarios such as corporate treasury tokenization, real estate tokenization, and private equity fund tokenization are transitioning from proof of concept to large-scale implementation, a trend that may redefine asset liquidity and ownership models in the coming years.

The intersection of artificial intelligence and encryption technology has become an emerging hotspot. Although specific investment data is not listed separately, Thorn particularly emphasizes the development potential of this field in the report. Projects such as decentralized computing networks, AI model ownership tokenization, and blockchain-based data markets are receiving early funding support, aiming to address core issues faced by the AI industry such as data privacy, allocation of computing resources, and model transparency.

In contrast to the aforementioned pragmatic trends, investments in the once flourishing sectors of NFTs, GameFi, and the metaverse have clearly cooled down. This shift not only reflects changes in market preferences but also reveals the industry's pursuit of sustainable business models. Investors are gradually realizing that long-term value creation relies on actual utility and revenue generation capacity, rather than mere conceptual innovation or community speculation. However, these areas still retain early investment activities, indicating that innovation is still ongoing, albeit with higher standards and stricter selection.

Market Impact and Outlook: The Rise of ETFs and the Restructuring of Venture Capital Dynamics

The recovery of the crypto venture capital market is intertwining with another important trend—the rise of spot Bitcoin ETPs and the proliferation of digital asset treasury products. According to a report by Galaxy Digital, this new product form is changing the allocation strategies of institutional investors, with many pension funds and hedge funds preferring to gain exposure to crypto assets through high liquidity tools rather than direct investments in early-stage startups. This shift partly explains why the rise in crypto prices has not fully translated into the venture capital market as seen in previous cycles.

The changes in the global interest rate environment are also affecting the venture capital landscape. Compared to the zero interest rate era of 2021, the current higher global interest rates have increased the cost of capital, making investors more cautious about high-risk early-stage projects. At the same time, the investment boom in adjacent technology fields such as artificial intelligence has diverted some venture capital, causing the crypto field to compete for limited funding resources with more sectors. This macro backdrop has prompted crypto venture capital to place greater emphasis on companies' profitability pathways and cash flow management capabilities.

From the perspective of investment themes, the next round of rise may be driven by three major trends: the improvement of institutional infrastructure, the adoption of tokenization technology, and the innovation of user experience. As traditional financial institutions accelerate their entry, accompanying compliance tools, risk management systems, and settlement networks will continue to attract funds; the tokenization of physical assets may become an important bridge connecting traditional finance and the Crypto Assets ecosystem; meanwhile, simplified products aimed at mainstream users are expected to drive the next wave of large-scale adoption.

Despite the challenges, the long-term outlook for crypto venture capital remains bright. A clear regulatory framework, technological advancements, and institutional adoption have created a more solid foundation for the industry, while the global digitalization process and the younger generation's natural affinity for digital assets provide a continuous rise in momentum. Similar to the development trajectory of the internet, the crypto industry is transitioning from the exploration phase to the construction phase, and during this stage, venture capital may no longer pursue miraculous hundredfold returns, but will focus more on building long-term value and sustainable businesses.

As $4.65 billion in venture capital flows into the crypto space in the third quarter of 2025, we witness not only a numerical recovery but also a fundamental shift in the growth trajectory of the entire industry. The transition from chasing concepts to valuing utility, from early-stage ventures to later-stage stability, and from a globally decentralized landscape to one dominated by the U.S. outlines a gradually maturing industry landscape. For astute observers, the real insight may lie in the fact that the crypto economy is undergoing a silent evolution, its ultimate form potentially closer to the mainstream than anyone imagines, yet subtly redefining the boundaries of the mainstream.