Paradigm's Math Problem: $12.7 Billion, Too Big for a Single Crypto Fund

Let's start with a math problem.

A VC firm manages $12.7 billion in assets. Its previous fund raised $850 million. The fund before that was $2.5 billion.

The direction is reversed.

The scale is shrinking, not because they can't raise money, but because there aren't enough worthwhile targets to bet on. Now, the firm wants to reverse this trend. Where does it need to look for the next sufficiently large pool?

On February 28, 2026, The Wall Street Journal provided the answer: cryptocurrency investment firm Paradigm is raising a new fund of up to $1.5 billion, expanding its investment focus to artificial intelligence, robotics, and other cutting-edge technologies.

This is not a sudden decision. It is a math problem that has been in the works for some time, only revealing its answer today.

Lay Out the Numbers First

In 2025, global cryptocurrency VC investment reached $49.8 billion. Sounds like good news. But looking at this number alone would lead to a misunderstanding.

In the same year, the number of crypto VC deals plummeted by about 60% year-on-year, from around 2900 deals to 1200 deals. Money is increasing, projects are decreasing. Funds flowing into the crypto space are increasingly concentrated on a few large transactions rather than spread across hundreds of early-stage projects.

For the vast majority of small to medium-sized funds, this may not be a problem. But for Paradigm, it's a structural challenge. Managing $12.7 billion in assets, Paradigm is one of the world's largest cryptocurrency-exclusive VCs. Its issue is not finding projects but finding a sufficient number of large, early-stage projects that can deploy funds of this magnitude while maintaining its accustomed return expectations.

In 2021, Paradigm raised the largest cryptocurrency fund in history, a $25 billion fund. In 2024, it announced its third fund, a $8.5 billion fund, only a third of the previous fund.

This contraction is not a sign of weakness but a proactive adjustment to a narrower market. However, it also indicates one thing: relying solely on crypto, Paradigm has struggled to find a path forward for its scale.

After FTX, Paradigm Starts Asking a Question

To understand today's $15 billion, we must first go back to November 2022.

That month, FTX imploded. Sam Bankman-Fried's empire turned to ashes in a matter of days, taking with it the money of countless institutions. Paradigm's on-paper investment in FTX was $278 million. Ultimately reduced to zero.

For a top-tier institution known for being "research-driven" and priding itself on a technical eye, this was not just a bad debt. It was a public judgment error that required explanation to LPs, the market, and themselves.

What happened next seemed rather peculiar at the time. In 2023, someone noticed a subtle change on Paradigm's official website: all mentions of "crypto" and "Web3" had been quietly scrubbed, replaced with the more neutral term "technology investment."

This change was made without any official announcement, but was quickly noticed by the community, sparking intense discussions. The biggest concern was: Is Paradigm running away?

Co-founder Matt Huang had to come out and do damage control. He tweeted that Paradigm was "more excited about crypto than ever," adding, "The advancements in AI are too incredible to ignore. Framing AI and crypto as zero-sum is a popular but mistaken narrative. We don't subscribe to it. Both are fascinating and will have significant overlap."

This was a PR natured clarification, but it also revealed a truth: internally, Paradigm had been seriously considering AI.

After FTX, the question that had to be answered was: What to bet on for the next decade?

Matt Huang is Already Providing the Answer

If you only look at Paradigm's official announcements, the company's transformation seems to have just begun today. But if you look at Matt Huang's actual actions over the past two years, you'll find that he is no longer just a crypto investor.

In 2024, Paradigm invested $50 million in Nous Research. Nous Research is an AI infrastructure company focused on the research and development of open-source large language models. This was not an "exploratory" small-scale trial; $50 million was Paradigm's serious bet size.

In February of this year, Paradigm also co-published EVMbench with OpenAI, a benchmarking tool to evaluate the ability of different AI models to detect and patch smart contract security vulnerabilities. The core infrastructure of cryptocurrency met AI capability assessment, bringing these two worlds to the same table.

At the same time, Matt Huang was also building another company: Tempo. This is a stablecoin payment infrastructure company where Matt Huang is a co-founder, and his board membership at Stripe aligns closely with this direction. Stripe established a strategic partnership with Paradigm in 2025, and that same year, Stripe also introduced a stablecoin payment product.

Putting all this together, Matt Huang isn't "going into AI"; he has been living at the intersection of AI and crypto for at least two years now.

His bet is not on AI, nor on crypto, but on the convergence of these two things at some point. And when AI agents start needing to execute transactions on-chain, when robots need a programmable monetary system, that point of impact is Paradigm's next main battlefield.

Why AI×Crypto Instead of an AI Pivot

For Paradigm, venturing into AI does not mean it is competing with a16z or Sequoia for the same set of projects.

There is a narrative mistake that is easy to make: interpreting Paradigm's new fund as "yet another VC pivoting to AI." But if it were just that, it would have no advantage; the general AI track is already crowded with traditional VC behemoths with deeper backgrounds and stronger resources.

Paradigm's real logic is this: it does not intend to compete for the general AI cake; it aims to bet on the intersection that others have not yet fully grasped.

AI agents are one of the hottest concepts right now. These intelligent entities capable of autonomously performing tasks have begun to replace humans in various scenarios: search, code writing, data analysis, process management. But there is one thing they have not solved yet: money.

When an AI agent needs to make payments, receive payments, transfer funds between different services, what does it use? PayPal? A bank account? These systems are designed for humans, require identity verification, human authorization, and are not compatible with machine autonomous execution logic.

But stablecoins can. Smart contracts can. Programmable money can.

That's why Matt Huang is working on both Tempo (stablecoin payments) and investing in Nous Research (AI infrastructure): he believes these two tracks will eventually converge, and Paradigm has the ability to bet on both sides and reap the greatest rewards at the moment of convergence.

This is not a transformation, it's an expansion. An expansion into a territory he believes others haven't fully grasped yet.

LP Needs a New Narrative

There is also a practical dimension that must be made clear.

Paradigm's LPs, the institutions and individuals who have entrusted their money to its management, saw the ambition of raising $2.5 billion in 2021 shrink to a restrained $850 million in 2024.

With such a stark difference in fund sizes between the two rounds, an explanation is needed. What's even more needed is a convincing narrative about the next fund.

“Continuing to invest in early-stage crypto projects” is a story that struggled to support a $1.5 billion fundraising target in 2024. But “leveraging the technological edge of crypto, entering frontier tech in the AI and robotics age” can.

In 2025, 61% of global VC funding flowed into the AI track, totaling around $258.7 billion. This is the largest pool in today's venture capital arena. The $1.5 billion Paradigm is raising this time is meant to tap into this pool, rather than continue to guard a shrinking lake. For LPs, this is a bigger story and a more credible growth logic.

Now, let's go back to 2023. That year, when Matt Huang was forced to come out and clarify the website redesign incident, he said this: “AI and crypto are not zero-sum competition.”

At that time, this statement seemed more like a defense. To appease the community, halt LP panic, and carve out space to explore AI. But reread in today's context, it sounds more like a prelude.

Paradigm took three years to emerge from the ruins of FTX. It didn't choose the simplest path of downsizing, focusing on crypto, and waiting for the next bull market. It chose a more challenging path, with greater imaginative space: betting on the fusion of AI and crypto, establishing positions in both tracks, and then waiting for the moment they converge.

Today, this $1.5 billion fund is a milestone along the road.

Matt Huang has not yet publicly responded to today's Wall Street Journal article. But his Tempo is still under construction, Nous Research is still running, and EVMbench has been released.

He doesn't need to explain anymore. Those actions have spoken louder than any statement.

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