In May 2025, the crypto market remains tough for retail investors. Venture capitalists are keen on stablecoins, AI, and real-world assets (RWAs), despite facing losses. Stablecoins could see a huge increase in issuers, while AI development is lagging behind Web2. VCs are feeling pressure from market declines and tariffs but express cautious optimism about funding opportunities moving forward.
As we dive into May 2025, retail investors in the crypto market are feeling the pinch with portfolios showing little promise. Yet, the questions loom large: what pathways are venture capital (VC) firms exploring in this challenging landscape? Insights shared recently by Andy, host of The Rollup Co., hint at a few potential directions that could prove enlightening for individual investors looking to navigate these waters.
The conversation kicked off with what’s capturing VC interest for the rest of 2025. Notably, stablecoins are on the horizon. “Stablecoin issuers are very investable and will likely 10x in quantity,” Andy reported. With over 200 stablecoins listed on CoinMarketCap and 300 tracked by CoinGecko, there’s a growing market that’s now surpassed a $225 billion cap, primarily dominated by Tether and Circle. If predictions bear out, hundreds more stablecoin issuers could emerge, paving the way for various investment avenues like airdrops, yield incentives, and DeFi initiatives.
Another area catching the eye of VCs is artificial intelligence (AI), although there’s an acknowledgement that there’s a disconnect in development between Web2 and Web3 frameworks. “The AI sector is interesting but better builders in Web2, for now,” Andy commented. Recent data from BeInCrypto suggests AI agents are growing by about 33% monthly, yet a mere 3% operates under Web3. This clearly illustrates VCs’ concerns that Web3 AI may require further time to establish viable use cases.
Anthony, founder of blockchain121, also highlighted the trend of decentralized AI projects attracting top talent from the Web2 sphere, noting, “Legit DeAI projects really are, for the first time, attracting true world-class engineers and researchers from Web2 AI.”
Moreover, RWAs—real-world assets—are capturing considerable VC attention. Andy didn’t hold back saying, “RWAs, RWAs, RWAs are all that matter.” As reported, the RWA market cap climbed over $20 billion in April, though it stands around $18.9 billion now, according to RWA.xyz data. The backing from financial behemoths like BlackRock and Fidelity has certainly bolstered confidence in RWAs for the long haul. Tren.finance even speculates the market cap could soar past $10 trillion by 2030, which is quite the hefty prediction.
In addition to stablecoins and RWAs, the Bitcoin liquidity markets are also a hot topic among VCs. Meanwhile, it’s not all rosy for venture capitalists this year. The crypto market has been in a slump similar to other sectors, pushing VCs into rough waters. Changes in macroeconomic policy like tariffs have placed extra strain, leading to a noticeable shakeout. Andy pointedly stated, “Crypto VCs are getting their margins squeezed as of late. Many will not return positive returns to their LPs.”
It’s also troubling to see the impact on raising new funds. Many tokens that VCs invested in recently aren’t launching successfully or have suffered significant declines. Andy encapsulated the sentiment: “There will be an exodus at some point. The strong will survive.”
Data from CryptoRank indicates that crypto VC funding hit $4.8 billion in Q1 2025, marking the highest level since Q3 2022, largely thanks to key deals like MGX and Kraken. In April, funding climbed to $2.3 billion across 87 rounds, hinting that, despite the downbeat atmosphere from investor withdrawals and macro pressures, VCs maintain a cautiously optimistic outlook, seeing funding volume and deal flow upswing compared to the previous two years.
Ultimately, the VC community is navigating a landscape dotted with both opportunities and challenges, reflecting a complex year ahead in the crypto arena.
