Venture Capital Activity Declines in Crypto Sector Amid Shift to Stablecoins and RWA Startups

The cryptocurrency sector witnessed a significant decline in venture capital activity during the second quarter of the year, with startups in this space raising a total of $1.97 billion. This marks a 59% decrease in funding compared to the previous quarter and the second-lowest quarterly total since the fourth quarter of 2020. The number of deals also saw a reduction, dropping by 15% during the same period, as the industry grapples with shifting capital flows and macroeconomic uncertainties.

Decline in Venture Capital Activity

Throughout the first three quarters of 2025, venture capital deal volume in the crypto sector has declined by 11%, reflecting a cautious investment environment. The total number of venture capital deals fell from 9,197 to 8,717. Particularly, low-value investments, defined as those less than or equal to $10 million, decreased by 11%. This trend highlights a broader slowdown in venture capital activity, as investors exercise caution amidst ongoing macroeconomic challenges.

In the fourth quarter of 2025, the decline in crypto venture capital activity continued, with a noticeable shift in investor priorities. The focus has turned towards stablecoins and decentralized finance (DeFi) projects, as these areas present more stable and potentially lucrative opportunities compared to traditional cryptocurrency ventures.

Shift Towards Stablecoins and Real-World Asset Startups

The changing dynamics in the cryptocurrency market have led to a growing interest in stablecoins and real-world asset (RWA) startups. The stablecoin market cap has surpassed $300 billion, reflecting increased adoption and investor confidence in these digital currencies. Companies like Hercle have capitalized on this trend, raising $60 million for stablecoin infrastructure projects. Hercle has processed over $20 billion in transactions, with 90% of these transactions settling in under five minutes, showcasing the efficiency and appeal of stablecoins.

Meanwhile, other companies such as Grvt and Stablecore have also made headlines by securing significant funding rounds. Grvt closed a $19 million Series A round, and Stablecore raised $20 million in seed funding, both focusing on digital asset treasuries and the stablecoin market. This shift in capital flows is indicative of a broader trend towards more stable investments within the volatile crypto landscape.

Focus on Energy Assets and Merchant Adoption

In addition to stablecoins, there is a growing interest in real-world asset (RWA) startups within the crypto sector. Plural, for instance, has raised $7.13 million to focus on energy assets, highlighting a diversification of interests among investors towards more tangible and sustainable ventures.

Furthermore, the funding environment has seen initiatives aimed at boosting merchant adoption of stablecoins. Temple Digital raised $5 million in seed funding, while Canton Network developer Digital Asset secured $135 million. These investments aim to facilitate the integration of stablecoin payments within traditional commerce, further blurring the lines between conventional financial systems and digital currencies.

Technological Innovations and Future Prospects

Innovative solutions continue to emerge within the crypto sector, despite the overall decline in venture capital activity. Arx Research, for example, is developing a device called Burner Capital, which aims to accept both stablecoin and traditional payments. This technological advancement could play a crucial role in bridging the gap between digital and fiat currencies, encouraging broader adoption of stablecoin transactions.

As the crypto industry navigates a cautious investment environment, some Bitcoin ventures are choosing to bootstrap through community support, emphasizing the importance of grassroots initiatives and community engagement in sustaining the sector.

Overall, the cryptocurrency sector is undergoing a period of transformation, with investors prioritizing stablecoins and real-world asset startups amid macroeconomic uncertainties. While venture capital activity has slowed, the focus on stable, innovative projects suggests a strategic pivot towards long-term sustainability and growth within the digital asset landscape.