Crypto VC Funding Dips, M&A Soars
May 2025 saw a significant downturn in cryptocurrency venture capital (VC) funding, reaching its lowest point of the year. This slowdown, according to analysts, is a result of a confluence of market-specific and macroeconomic factors impacting investor sentiment.
VC Funding Slowdown
RootData reports only 62 investment rounds were completed in May, a monthly low not seen since January 2021. While the number of rounds decreased, the total investment value still reached over $909 million, making it the second-best month of 2025 in terms of value, behind March's $2.89 billion across 78 rounds.
Aurelie Barthere, principal research analyst at Nansen, attributes the slowdown to a "combination of market prices and sentiment," noting that both peaked in late January and only partially recovered before weakening in late May due to renewed trade tensions.
Patrick Heusser, head of lending at Sentora, adds that a challenging macroeconomic environment, including persistent high interest rates and volatile bond markets, has created headwinds for risk assets, making it difficult to finalize M&A deals. He observes that current transactions largely represent consolidation efforts, a common pattern in cooling markets.
The underperformance of most crypto assets in 2025, with Bitcoin being a notable exception, has also dampened investor enthusiasm.
Mergers and Acquisitions Remain Robust
Despite the dip in VC deals, the merger and acquisition (M&A) sector thrived in May. Coinbase Global's $2.9 billion acquisition of Deribit, announced on May 8th, set a new all-time high for crypto M&A activity, according to RootData and Blockworks. This signifies a shift towards larger, established players consolidating market share.
Nansen's Barthere suggests that increased regulatory clarity will likely further encourage direct deals between large companies and protocols, reducing reliance on the VC market.
Marcin Kazmierczak, co-founder and COO of RedStone, suggests the May slowdown might also reflect typical seasonal patterns. He anticipates an uptick in activity in the latter part of the year.
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