Regulation
|4 min ReadCrypto VCs hit a wall as funding model flips
Tariq Al-Saidi
Senior Analyst
Published
Jan 16, 2026
Deals dry up, playbooks pivot
In 2024, crypto VCs chased hot narratives and wrote checks fast. In 2025, that world disappeared. Asia’s once-hyperactive firms slammed the brakes: SevenX Ventures hasn’t posted a new deal since December 2024; Foresight Ventures fell from 54 deals to 5; HashKey Capital dropped from 51 to 18. Even OKX Ventures, last cycle’s pace-setter with 72 deals in 2024, is down to 12 this year. The energy moved from hunting seeds to managing exits.
ABCDE, the firm founded by Du Jun, stopped new investments and paused its second fund in April, shifting to portfolio support and exits. Across the industry, smaller shops are being squeezed. One partner, Jack, sees a split: roughly 5 to 7 percent pivoted into marketing or KOL agency work; 8 to 10 percent turned into incubator or post-investment operators, expanding those teams by 30 to 50 percent. Many more moved to the secondary market, stretched fund lifecycles, cut costs, or aimed for compliant exit paths like ETFs, DATs, and PIPEs. In plain English: VCs became service providers, or just bigger retail punters. Tough medicine, but that’s the game.
Why the old model broke
The “story over product” era ended. PitchBook shows global crypto/blockchain VC fell to $1.97 billion in Q2 2025, down 59 percent quarter-on-quarter, a low since 2020. Later-stage rounds now exceed 50 percent of volume, signaling investor preference for real revenue and verifiable cash flow. Waterdrip Capital partner Dashan put it bluntly: early narrative deals are harder; exchanges, stablecoin issuers, and RWA protocols with income get the capital.
Listing pop also faded. Even with more Binance listings this year, CoinGecko data shows new tokens averaged a 42 percent drop 30 days after TGE in H1. Exits are being re-engineered through ETFs, tokenized funds, protocol buybacks, and ecosystem war chests. “Speculation didn’t vanish,” Jack said. “The window just shrank. Beta gave way to Alpha selection.” Former VC investor Mark was harsher: “Pure primary investing is basically suicide now.”
The power balance shifted against VCs. Analyst KK notes long lockups collide with fast-moving narratives; many tokens slump by unlock. Worse, last cycle’s high-valuation deals aren’t supported by fundamentals. And when liquidity is king, market makers, exchanges, and KOLs capture the cheapest chips and the attention. VCs bring money, but little pricing power. Everybody knows it.
Fundraising squeeze and who still pays
Raising capital turned brutal. Q2’s $1.97 billion headline tells the story. Traditional dollar LPs pulled back after weak returns and found easier ways to earn 30 percent plus — blue-chips, DeFi yield, options. New money is more selective: Gulf sovereign funds and Asian family offices in Singapore and Hong Kong want audited structures, licensed custody, measurable cash flow, and hybrid funds that blend liquid and illiquid so some returns realize sooner. Capital is concentrating at the top. Without sharp differentiation or strategic distribution, smaller funds struggle. For native crypto VCs, the lack of industrial leverage — exchange pipes, market-making, or self-funded balance sheets — is a huge handicap.
Where the next winners emerge
The reset isn’t the end. It’s the filter. Stablecoins could surpass 10 to $16 trillion by 2030 — issuance, on-chain settlement, and RWA infra are real opportunities. Each cycle mints new winners around new assets: venues, derivatives, and inventive DeFi.
But VCs must change roles. Become “investment banks” for crypto: add market-making, compliance, liquidity support, even operational lift. Build structured funds — DAT, PIPE, SPAC — to give LPs clearer exits and turn fuzzy narratives into expected cash flows. Above all, get serious about research and data: on-chain revenue, retention, protocol fees. No more betting on vapor.
History’s irony is constant: those who survive the hardest stretch tend to own the next boom. This “weightless era” may be where the next star is born. Stay standing, and the upside can be tremendous.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.