The Surge in Funding
Venture capitalists are investing heavily in blockchain and crypto companies, anticipating their success when cryptocurrency usage becomes widespread. They think blockchain will become as important asd computing is today. While coders are actively developing innovative technology, venture capitalists are also demonstrating their interest by increasing their investments.
In 2025 alone, global VC investments in blockchain and crypto-related projects exceeded $50 billion, surpassing totals from previous years combined. The funding rounds generated significant excitement as the stakes increased monthly with ever-increasing amounts. Such rounds have become commonplace, with some early-stage start-ups raising hundreds of millions before even launching a viable product. One such decentralized finance (DeFi) protocol raised $250 million in seed funding despite having no active users or revenue model.
We must note, however, that this past year has brought a cryptocurrency recession with the max drawdown in crypto since 2017-2018. Bitcoin and Ethereum have shed almost 70% of their value, and other tokens much more. Events like the FTX affair and the collapse of Terra confirmed the fears of many underwhelming outcomes of crypto tech. Still, the perception among many is that the tech is so revolutionary
Fearing a lack of capital, the C48s went into safe mode, while a gambler’s SOP could go haywire, and who knows, ‘SOP’ may even make an enlivening impact. But omens say most of it is just fun speculation, hype, and result-ended.
“Investors are putting cash into anything with ‘blockchain’ in its pitch deck,” James Carter said. But when you analyze them more closely, you will discover that they do not have workable use cases or a sustainable business.
Underperformance Amid High Expectations
Lots of money is coming into the world of blockchain, but start-ups are still failing. Venture Metrics has published a report that suggests that almost 40% of blockchain companies that have received VC funding in the last 2 years will not have any revenue/user adoption as of 2025. Some have made lots of attempted changes in their operations, while the others have just failed without any noise.
One example is an NFT marketplace that raised $150 million but failed to gain traction after the hype wore off. In the same way, many DeFi platforms have suffered technical faults and scrutiny by regulators, limiting their growth.
Dr. Laura Martinez, an expert in things with VC, said, “The problem isn’t just underperformance, but misaligned incentives.” “Businesses should be buildable and sellable, not just a way to raise enormous money, which is what happens now.” Pressure builds to launch something flashy versus something sustainable.
Why the Disconnect?
Many things play the role of misalignment between funding and performance. Because of the crypto space’s competitiveness, valuations are high as investors rush to buy into projects before they are thoroughly examined. The decentralized nature of blockchain can sometimes hinder the growth of start-ups because it does not align with a traditional business approach.
Regulatory uncertainty also looms large. More and more blockchain companies are operating in the legal gray area, making them susceptible to crackdowns. In 2025, the U.S. SEC sued many VC-backed projects for breaking the law. This brought huge changes to the way business is done.
According to blockchain policy advisor Sarah Lin, regulation has both negative and positive consequences. “It can make things clear as well as give you legitimacy, but careful handling will not stifle innovation.”
Lessons from the Dot-Com Era
The similarities with the late 1990s dot-com bubble are unmistakable in today’s crypto VC scene. In the past, Internet start-ups raised large amounts of money based on unproven ideas, with most of them failing to take off. While many notable names managed to survive the dot-com bubble, most start-ups of that era vanished completely.
Industry experts warn of the repeat of history if VCs have a more disciplined approach. Marcus Reed, CEO of a successful blockchain analytics firm, said, “Let’s stop funding ideas and start funding execution.” The best technology is useless if it does not solve real problems for people.
A Path Forward
Investors should do much stricter due diligence and look for actual teams with proof of execution and a concrete plan. That is what experts suggest to avoid a crash. Start-ups should focus on developing products that truly meet market needs instead of merely chasing fads.
Regulators also play a crucial role. Governments can help weed out bad actors while supporting legitimate projects by providing clear guidelines and helping create innovation-friendly policies.
At the moment, the crypto VC bubble is still inflated, but it will be hydrogenated by all the actors’ actions. According to Dr. Martinez, the future of blockchain is determined not by code but by the decisions we make today.
In this transition, not every blockchain start-up will certainly survive, but those that do could transform industries for decades.
