Crypto VC Surge Decoupled From Token Prices as Institutions Bet on Infrastructure

Crypto venture capital funding surged to $4.65 billion in the third quarter of 2025, marking the second-highest level since the collapse of FTX in late 2022 and a 290% increase from the previous quarter. The rebound reflects renewed institutional interest in digital assets, with capital concentrated in stablecoins, AI-driven tools, blockchain infrastructure, and trading platforms according to market analysis. Despite the growth, activity remains below the 2021–2022 bull market peaks, and the sector continues to grapple with structural shifts in investor behavior and regulatory dynamics as research shows.

The quarter saw 414 deals, with seven transactions accounting for half of the total capital. Revolut led the pack with a $1 billion round, followed by Kraken ($500 million) and Erebor ($250 million) according to funding reports. These large deals underscored a broader trend of capital flowing toward mature companies, particularly those founded around 2018, while startups launched in 2024 captured the highest number of smaller transactions. Pre-seed deal activity, however, declined, signaling a maturation of the crypto ecosystem as investors prioritize scalability over early-stage experimentation as data indicates.

The surge in venture activity contrasts with the muted correlation between crypto VC funding and token prices in recent years. Unlike 2017 and 2021, when VC inflows closely tracked rising Bitcoin and Ethereum valuations, the 2023–2025 cycle has seen capital deployment lag despite market recovery. Thorn highlighted waning interest in gaming, NFTs, and Web3, alongside competition from AI startups and higher interest rates, as key headwinds according to market analysis. Additionally, spot Bitcoin exchange-traded products (ETPs) and digital asset treasury companies are drawing institutional capital away from early-stage crypto ventures, offering liquid, regulated alternatives as reported by industry sources.

Geographically, the United States dominated the landscape, securing 47% of the capital and 40% of the deals. The UK followed with 28% of funding and 6.8% of transactions, while Singapore accounted for 3.8% of capital and 7.3% of deals according to regional data. Alex Thorn, head of research at Galaxy Digital, attributed the U.S. lead to a pro-crypto regulatory environment, including the recently enacted GENIUS Act and anticipated legislative reforms, which could further entrench its dominance.

Looking ahead, regulatory clarity remains a critical factor. The U.S. market structure bill, if passed, could incentivize traditional financial institutions to enter the crypto space, potentially unlocking new capital. Meanwhile, venture firms face a challenging fundraising environment, with average fund sizes rising to $163 million but deal counts near five-year lows as industry reports show. Despite these challenges, the sector's focus on infrastructure and AI integration suggests a shift toward utility-driven innovation, positioning crypto for long-term institutional adoption according to expert analysis.