As cryptocurrency and blockchain markets evolve, venture capitalists are showing increasing interest in sectors that merge traditional finance with innovative digital solutions. According to recent forecasts by PitchBook, venture capital deals in the crypto space are expected to reach $18 billion this year. With a selective funding approach, investors are keen on projects that present real-world applications, particularly in the areas of decentralized physical infrastructure networks (DePIN) and real-world asset (RWA) tokenization.
Among the prominent voices in the venture capital landscape, Xiao Xiao, a partner at the Hong Kong-based HashKey Capital, elucidates the strategic focus on projects that connect the realms of Web2 and Web3. “We are especially bullish on solutions that can bridge these two worlds, such as DePIN and RWA tokenization,” he stated. With a current market capitalization of nearly $20 billion, DePIN projects have attracted significant attention and investment in recent months.
The DePIN sector recorded substantial fundraising success, raising over $350 million in 2024 alone through various funding rounds including pre-seed, seed, and Series A. Despite a recent downturn in the crypto market that saw its peak market cap decline from $44 billion, the underlying technology continues to attract interest from investors eager to capitalize on the blend of physical infrastructure with blockchain technology.
On the other hand, RWAs have demonstrated a different trajectory, boasting a cumulative value of $17.1 billion. Financial tokenization of RWAs has become a popular avenue, with private credit and US Treasury debt leading the charge. This trend highlights the growing acceptance of digital assets that are not only speculative but grounded in tangible assets, thereby increasing the potential for sustainable investment growth.
As the market matures, the selection process for new projects is becoming more rigorous. “The challenging function now is choosing which projects to deploy capital to,” Xiao added. This is a critical shift in the venture capital landscape, as investors become more discerning about the opportunities they pursue. Furthermore, external factors, such as political changes in the United States, have a ripple effect on global investment strategies in cryptocurrency.
Looking to the future, Xiao anticipates a rise in VC deal activity in 2025, supported by favorable economic conditions like declining interest rates and increased regulatory clarity in the US. As Xiao succinctly notes, the market is witnessing a notable shift from infrastructure-focused projects to more consumer-facing initiatives. This evolution signals a maturation of the crypto market where early-stage teams can leverage robust infrastructures and advancements in artificial intelligence to build applications more efficiently.
In conclusion, the optimism among venture capitalists about the potential for DePIN and RWAs is indicative of a broader trend toward innovative financial solutions that integrate the physical and digital realms. With continued support and investment, these sectors may play a pivotal role in shaping the future of finance in a post-pandemic world.
