VC Looks at 2025 Crypto Investments: 118 Tokens, 84% Underperforming, Only One Type of Company Quietly Making Money

Author: Ching Tseng

Translation: Deep Tide TechFlow

Deep Tide Guide: Investor Ching Tseng divides crypto companies into four quadrants: crypto-native/traditional finance-oriented, with traction/no traction. Among 118 token issuances in 2025, 84.7% are below issuance price, and projects that are crypto-native but lack traction are destroying capital on a large scale, while traditional finance-oriented and tractionful companies are capturing the $18 billion RWA market. This article clarifies where the money is flowing and which tokenomics are already failing.

This year, sitting on the investor side, I found that almost every crypto founder I meet can be categorized into one of four types. The two axes are simple: crypto-native vs. traditional finance-oriented, with traction vs. no traction. Four quadrants cover about 75% of the market.

The challenges faced by each quadrant are completely different. Here is my breakdown.

Crypto-native, no traction

This is the most crowded quadrant and also where capital destruction is most severe.

These teams are still showcasing TVL numbers inflated by the last cycle’s hype but cannot explain why they were effective back then. They ask for valuations of $20 million, $30 million, sometimes even $200 million, with only a functional token and a roadmap, claiming the token has a “clear use case” because it pays fees or governance votes.

The data is brutal. Among 118 token issuances tracked in 2025, 84.7% fell below the issuance price, with a median fully diluted valuation down 71%. Some of the most watched “native DeFi L1” launches in this cycle saw TVL drop over 90% within the first year, and token prices moved in unison. AI-related tokens group has an average annual return of -50%, with several top performers in 2024 retracing over 80% from their peaks.

The pattern is consistent. Initial traction comes from users seeking quick profits rather than genuine interest in your product. Tokens priced based on narrative valuation, with no revenue or user retention supporting the valuation, bleed in 2025. Massive emissions reveal that on-chain activity is mainly mercenary behavior.

What this quadrant needs to internalize is: the long-term value of a token comes from the team’s ability to generate revenue and return capital to holders, not from artificially forcing utility on users. Regulation still prevents anyone from openly saying “a token is equity,” but empirical evidence shows that this is the only effective model. Everything else is at best cyclical trading.

If you are here, honest practice is not to issue more tokens. Instead, return to fundamentals: who are your real users, what are they willing to pay for, and how can you capture a portion of that?

Crypto-native, with traction

This quadrant is full of teams that built real products years ago, often in the last cycle, quietly earning good income from trading, lending, or swapping fees. Small teams, cash flow covering salaries, effective products.

Sounds good? But they also face challenges.

Most issued tokens early on and now face structural issues: revenue exists, but tokens have no mechanism to claim a share of it. Some of the largest products in the market have monthly trading volumes in the tens of millions or even over a billion dollars, but the direct value captured by tokens over the years is zero. No matter how good the revenue/profit, the market does not truly trade tokens at consistent multiples; it prices based on expected growth rather than current economic reality.

The buyback debate is another story in this quadrant. Some protocols promised to fund buybacks weekly with fees in early 2025, and within a month, their prices surged over 40%. Other protocols running automated buyback plans funded by fees bought back over $1 billion worth of tokens in seven months, with a peak daily buyback of nearly $4 million. Total DeFi buybacks in 2024-2025 amount to about $2 billion.

Buybacks sound like the answer. Sometimes they are. But for teams without spillover income, buyback tokens are just burning future runway to defend a price that may not hold. A harder and better question is: can you grow a second revenue stream that isn’t tied to crypto volatility? Because if traditional finance competitors build better distribution channels and onboard institutions while you rely on altcoin traders, your moat will quickly turn into infrastructure commodity pricing.

Traditional finance-oriented, no traction

This group expanded in 2024-2025. Custody tools, compliance middleware, tokenization rails, on-chain FX, institutional settlement—all genuinely useful. All expensive. All with quarterly rather than weekly sales cycles.

The problem isn’t the product. It’s the math. Founders raised $15-30 million based on the premise of institutional demand, but even onboarding a Tier 1 bank can take 12-18 months and require compliance infrastructure, burning a year’s worth of capital before the first dollar of revenue.

The good news is that the exit environment for this quadrant is exceptionally healthy. Crypto M&A hit a record $8.6 billion in 2025, with over 140 VC-backed crypto companies acquired, a 59% jump year-over-year. Major deals include existing giants paying hundreds of millions to billions of dollars for distribution, licensing, and enterprise relationships in derivatives, trading infrastructure, and payments.

If you are in this quadrant, a calm approach is to manage valuation and cash runway like your lifeline, aiming for meaningful M&A outcomes because it’s truly possible. Don’t price yourself out of the acquisition pool. Don’t burn 24 months chasing a corporate logo. Build mutually beneficial partnerships with larger players who might ultimately acquire you.

Traditional finance-oriented, with traction

The current winners of the system.

Tokenized real-world assets grew from $5.5 billion at the start of 2025 to $18.6 billion by year-end, a 3.4x increase in twelve months. The largest tokenization platforms now handle billions in institutional liquidity, with market leaders holding about 20% share, supporting one of the world’s largest tokenized government bond funds, with AUM close to $3 billion.

These companies aren’t trying to convince anyone that crypto is the future. Their institutional clients have already decided. The current game is straightforward enterprise sales: win more banks, more asset managers, more issuers; build alliance structures so that when institutions buy one product, they naturally buy your three partners’ products; optimize unit economics on your already-built compliance and custody stack.

If the team is purely a service provider, it becomes a classic enterprise software battle: sales velocity, net retention, deep integrations.

The main risk in this quadrant doesn’t come from crypto-native competitors. It’s from existing giants—large asset managers and global banks—eventually building their own rails, bypassing the startups that help them adapt on-chain. The window exists but isn’t unlimited.

While the four quadrants seem different on the surface, they are all navigating the same underlying shift: markets are maturing.

This doesn’t mean narratives are dead. Institutions chase hot topics too. Anyone who has watched valuations of semiconductors and AI over the past two and a half years knows this. But in mature markets, the half-life of pure narratives is shorter. They can get you started, but they can’t sustain your growth.