Original Article Title: "The Crypto VC Circle is Running Out of Gas"

Original Article Author: Ada, Deep Tide TechFlow

In April 2025, the well-known crypto VC ABCDE founded by Du Jun announced the cessation of new project investments and fundraising for its second fund.

This once-active investment firm has shifted its focus to post-investment management of existing projects and exit arrangements, becoming a microcosm of the current state of crypto VCs.

In 2024, we reported on a wave of "rights protection movements" among crypto VCs. At that time, a group of senior partners took off the "VC" halo and turned to project teams or the secondary market, all because of one saying: "Being a VC doesn't make money."

A year has passed, and the bull market has truly arrived.

Bitcoin has held steady above $100,000, Ethereum has returned to $4,000, and there have been occasional bursts of wealth in the secondary market. However, when the spotlight turns to the primary market, crypto VCs are finding it even more difficult than in the previous cycle.

They haven't made money, but they have been tarnished with a bad reputation.

They are being suppressed by exchanges, market makers, and project teams at every level of the ecosystem;

Their investment logic has been completely shattered after the narrative collapse;

They can't raise funds and are even questioned, "Are they less effective than KOLs?".

Where are crypto VCs heading?

What's Happening to Crypto VCs?

In the previous cycle, crypto VCs were accustomed to making quick bets. They chased after narrative trends, willing to invest in projects that had no product yet, or even a complete team, as long as the story was compelling enough to attract LPs and the secondary market.

It was an era where "telling a story was more important than building a product," but as we entered 2024–2025, this logic suddenly broke down.

So, how are the once-active Asian crypto VCs doing now?

According to RootData, compared to 2024, Asian crypto VCs have seen a drastic decline in their activities in the primary market from 2025 to date.

Taking the three giants of crypto VC that were most active in the previous cycle as an example, SevenX Ventures made its last public investment in December 2024, Foresight Ventures' number of investments plummeted from 54 to 5, and HashKey Capital's number of investments also dropped from 51 to 18.

In the 2024 Investment Firm Activity Top10, OKX Ventures ranked first with 72 deals, but this number had significantly dropped to 12 deals by 2025.

According to Jack, a VC partner in the crypto space, there is currently a significant divergence among crypto VCs. Small and medium-sized VCs are particularly struggling, with many being forced to pivot.

He provided his observations:

Between 2023 and 2025, approximately 5–7% of crypto VCs shifted to marketing/KOL agency businesses;

Around 8–10% of crypto VCs transformed into incubation/post-investment-driven organizations, with post-investment teams expanding by 30–50%;

For the majority of institutions, their responses included shifting to the secondary market, extending fund cycles, reducing management costs, or even pursuing compliant exit paths like ETF/DAT/PIPE.

In other words, VCs have turned into service providers or have simply become "whales among the retail investors."

Former crypto VC investor Mark bluntly stated, "Currently, running an exclusively first-level investment institution is almost like committing suicide."

LD Capital transitioned to the secondary market, and its founder, Yi Lihua, became an "ETH Whale Player," maintaining a strong presence.

Furthermore, some crypto VCs are being "forced" to enter the AI investment field.

As early as March, Jocy, a founding partner of IOSG, posted on social media, indicating that another project in their investment portfolio was transitioning to focus on AI. As more and more crypto investors find numerous AI entrepreneurs unexpectedly added to their investment portfolios, they are also compelled to vote with their feet.

For example, Bixin Ventures significantly reduced its investments in the crypto industry and chose to invest in emerging companies in the AI field, such as IntelliGen AI, which focuses on AI in healthcare.

Transitioning can be seen as a form of proactive self-rescue, while some institutions have directly announced halting investments. The well-known crypto VC firm ABCDE, founded by Du Jun, announced in April 2025 that it would stop new project investments and fundraising for its second phase, shifting its focus to post-investment management of existing projects and exit arrangements.

"ABCDE is relatively honest, openly stating they are quitting, but many more crypto VCs are quietly mourning," commented one VC industry insider.

With the sharp decrease in the number of projects being launched, the underlying paradigm of the current crypto primary market is undergoing a shift. In Jack's words, it is transitioning from "liquidity-driven narrative speculation" to "cash flow- and compliance-driven infrastructure development."

Over the past few years, the investment logic of crypto VCs has been highly narrative-dependent. However, the financing data for 2024–2025 shows a clear shift: according to Pitchbook data, global crypto/blockchain VC total financing in Q2 2025 was only $1.97 billion, a 59% decrease from the previous quarter and the lowest since 2020. Furthermore, late-stage financing accounted for over 50%, indicating that investors are more focused on mature projects with real income and verifiable cash flow.

"The difficulty of narrative-driven early-stage project financing has increased, and projects that can bring in revenue and profits (such as exchanges, stablecoin issuers, RWA protocols) are more likely to attract capital favor," said Dasha, a partner at Raindrop Capital.

In addition, the "listing effect" of top exchanges has also been greatly reduced in this round. In the past, getting listed on a mainstream exchange would bring valuation liquidity. However, since 2025, although the number of listings on Binance has increased, the drive effect on secondary valuation premiums has weakened. According to CoinGecko data, the average price drop in the first 30 days after new listings in the first half of the year exceeded 42%. Meanwhile, new paths for investment exit have emerged, such as compliance ETFs/tokenized funds (DAT), or structured secondary liquidity engineering such as protocol buybacks and ecosystem funds.

"This shift does not mean 'speculation is disappearing,' but rather the speculation window is narrowing, with Beta returns giving way to Alpha screening," Jack said.

VC Predicament

The current dilemma of crypto VCs can be summed up in one word: unprofitable.

Crypto analyst KK admits that the first and foremost issue is that current crypto VCs are positioned late in the crypto ecosystem. The lock-up period for a project with VCs is 1-3 years, but due to the rapidly changing narrative of the crypto industry, by the time the tokens unlock, the narrative-driven projects' window of opportunity may have passed, with token prices plummeting significantly or even approaching zero. Some projects have even announced their demise before being listed.

In addition, many crypto VCs took on too many high-valuation projects in the previous cycle. In this cycle, the logic has been disproven, as actual revenue and data cannot support such high valuations.

"Many VCs at that time took on a lot of high-valuation overseas projects, thinking that the higher the valuation, the more stable it would be, and it would be a branding boost to invest in overseas projects alongside well-known overseas investment institutions. But now it seems that many have suffered losses," KK said.

Most importantly, crypto VCs do not have bargaining power. "Essentially they can only provide money," Mark said.

One interviewee even bluntly stated, "In this market, the money from VCs is not as valuable as a Twitter KOL."

What does the project need most?

Not just money, but "liquidity resources."

Market makers can create depth in the secondary market, exchange listings directly determine whether a project can exit liquidity, and KOL shills can help the project team sell coins for cash quickly... These liquidity participants often take away the cheapest chips first, then flip them to VCs at multiples of the valuation. The result is that crypto VCs contribute the most money but get the worst price.

Thus, a absurd phenomenon has emerged: in the crypto market, crypto VCs have become the least powerful group in terms of bargaining, they are inferior to exchanges, inferior to market makers, and even inferior to KOLs.

The "capital kings" on the primary market have instead become the "end of the ecosystem chain" in the crypto industry.

Fundraising Predicament

If "not making money" is the survival dilemma for VCs, then "not being able to raise money" is a matter of life and death.

According to PitchBook data, in Q2 2025, the total global crypto VC financing amount was only $1.97 billion, a 59% decrease from the previous quarter, sharply contrasting with the peak of over $10 billion in a single quarter in 2021.

Why are many traditional LPs no longer investing? Apart from not seeing returns from projects invested in the previous round and having suffered losses, there is also the fact that "there are simpler ways to make money in the crypto world," Dashan said, "such as buying mainstream coins, DeFi mining, options arbitrage, etc., with average returns all above 30%, so it's very difficult to convince LPs to invest in VC as it takes several years to exit, and most likely they will still lose money."

On the other hand, the big players are changing.

Jack observed that current traditional USD LPs are shrinking, being replaced by Middle Eastern sovereign wealth funds such as Mubadala, QIA, and Asian family offices, especially in Singapore and Hong Kong, where many family offices are allocating crypto secondary and early-stage equity through FOs and multi-strategy funds.

However, these emerging LPs are more discerning:

They want to see real cash flow, no longer paying for PPT; they require compliance custody, audits, and fund licenses to avoid regulatory sniping; they prefer hybrid funds tied to secondary and primary investments, enabling partial short-term realization of returns...

The cruel reality is that money is becoming increasingly concentrated in a few hands.

"Unless they have a very strong vertical differentiation or key resources, it is more difficult for small to mid-sized funds to attract LPs," Jack said.

The fundraising challenge is particularly deadly for native crypto VCs. On one hand, they need to continuously fundraise, and on the other hand, they lack industry synergistic resources to empower them. For VCs with exchange or market maker backgrounds, or those using their own funds, they not only have money but also industry resources, giving them more confidence to secure cheap chips. However, native crypto VCs have to undergo this life-and-death ordeal.

To put it more bluntly: in this market, LPs do not lack investment opportunities, what they lack is certainty, which native crypto VCs precisely cannot provide.

Where to Break Through?

Although the current situation in the primary market is so brutal, players who are still in this market firmly believe that this is just a period of growing pains, and when the reshuffle is over, only those who remain at the table will be eligible to reap the fruits of success.

For the future, they remain optimistic.

"The current transformation is nurturing new opportunities," Dashan said. "For example, stablecoins. Some predict that the future issuance of stablecoins will exceed 30 trillion U.S. dollars, and around this 30 trillion, settlement, clearing, and compliance services will inevitably give birth to a new batch of targets. This is an opportunity for crypto VCs to lay out in advance."

The more macro-level narrative is equally enticing. According to the Citi GPS 2024 report, it is estimated that by 2030, the tokenized asset scale could reach 10–16 trillion U.S. dollars. Whether it is an on-chain settlement platform or the issuance side of real-world assets (RWA), it provides a point of entry for VCs.

"And in every cycle, new opportunities emerge around new assets, whether it is trading platforms, financial derivatives, or innovative DeFi projects, injecting vitality into the market," Mark stated.

However, if crypto VCs want to survive in this game, they must completely reshape their role.

They can step out of the identity of pure financial investors, provide market-making, compliance, liquidity support, or even directly engage in project operations. This model is more like an "investment bank" rather than a traditional VC.

Or build structured funds, design diverse exit paths for LPs through financial engineering methods like DAT, PIPE, and SPAC, turning the "uncertain narrative" into "predictable cash flow."

They must also establish true research and data capabilities, with on-chain revenue, user retention, and protocol fees as core quantifiable metrics, rather than continuing to bet on the next "empty narrative."

These directions may be the final chip for crypto VCs.

However, the irony of history is that those who can truly survive are often the ones who have survived in the most difficult environments. The "weightless era" of crypto VCs may be nurturing the birth of the next star.

After all, only players who still stand in the ruins are eligible to welcome the next bull market.

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