The "Weightlessness Era" of Crypto VCs may be nurturing the birth of the next star.
Written by: 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 second-phase fundraising.
This once-active investment institution has shifted its focus to post-investment management and exit arrangements for its existing projects, becoming a microcosm of the current state of crypto VCs.
In 2024, we reported on a wave of "rights protection" among crypto VCs. At that time, a group of senior partners shed their "VC" halos and turned to project parties or the secondary market, simply because of one statement: "Being a VC doesn't make money."
A year has passed, and the bull market has indeed arrived.
Bitcoin has consistently stabilized above $100,000, Ethereum has returned to $4,000, and there are occasional sounds of wealth in the secondary market. However, when the focus shifts to the primary market, crypto VCs are finding it even more difficult than in the last cycle.
They haven't made money, but they have taken on a lot of blame.
They are being suppressed by exchanges, market makers, and project parties within the ecological chain;
Their investment logic has been completely shattered after the narrative collapsed;
They can't raise funds and are even questioned about their "role being less than that of KOLs."
Where do crypto VCs go from here?
What’s happening to crypto VCs?
In the previous cycle, crypto VCs were accustomed to making quick bets. They chased narrative trends, willing to pour money into projects that didn't even have products or complete teams, as long as the story was enticing enough to attract LPs and the secondary market.
It was an era where "telling a story was more important than making a product," but entering 2024-2025, this logic suddenly failed.
So, what has become of the once-active Asian crypto VCs today?
Data from RootData shows that compared to 2024, the number of times Asian crypto VCs have acted in the primary market has seen a dramatic decline in 2025.
Taking the three major crypto VCs that acted most frequently in the last cycle as examples, SevenX Ventures' last public investment was in December 2024, Foresight Ventures' number of actions plummeted from 54 to 5, and HashKey Capital's investment frequency dropped from 51 to 18.
In the Top 10 active investment institutions of 2024, OKX Ventures ranked first with 72 actions, but this number has significantly reduced to 12 in 2025.
According to crypto VC partner Jack's observations, there is a severe differentiation among crypto VCs currently. Small and medium-sized VCs are particularly struggling, with many being forced to transform.
He provided his observations:
Between 2023 and 2025, about 5-7% of crypto VCs have shifted to marketing/KOL agency businesses;
About 8-10% of crypto VCs have transformed into incubation/post-investment driven institutions, with post-investment team sizes expanding by 30-50%;
The majority of institutions are responding by: turning to the secondary market, extending fund cycles, reducing management costs, or even pursuing compliant exit paths like ETFs/DAT/PIPE.
In other words: VCs have become service providers, or simply turned into "big players among the retail investors."
Former crypto VC investor Yinghao bluntly stated: "Currently, institutions that purely focus on primary investments are almost committing suicide."
LD Capital has transformed into the secondary market, with founder Yi Lihua becoming the "milk king player" of ETH, maintaining a presence.
Additionally, some crypto VCs are being "forced" to enter AI investments.
As early as March, IOSG founding partner Jocy posted on social media, stating that another project in his portfolio had transformed to focus on AI. As more and more crypto investors found themselves with an inexplicable number of AI entrepreneurs in their portfolios, they had to vote with their feet.
For example, Bixin Ventures has significantly reduced its investments in the crypto industry, choosing to invest in emerging companies in the AI field, such as IntelliGen AI, which focuses on AI healthcare.
Transformation is still a form of proactive self-rescue, while some institutions have directly announced a halt to investments. The well-known crypto VC ABCDE, founded by Du Jun, announced in April 2025 that it would stop new project investments and second-phase fundraising, focusing instead on post-investment management and exit arrangements for its existing projects.
"ABCDE is relatively honest, openly stating that they are done, but there are many more crypto VCs that are keeping it a secret," commented a VC practitioner interviewed.
With the drastic reduction in the number of actions, the underlying paradigm of the crypto primary market is undergoing a transformation. According to Jack, it is shifting from "liquidity-driven narrative speculation" to "cash flow and compliance-driven infrastructure construction."
In the past few years, the investment logic of crypto VCs has heavily relied on narratives. 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% quarter-on-quarter decline, marking a low point since 2020; at the same time, the proportion of later-stage financing exceeded 50%, indicating that investors are more focused on mature projects with real income and verifiable cash flow.
"The difficulty of financing narrative-driven early projects has increased, while projects that can generate income and profits (such as exchanges, stablecoin issuers, RWA protocols) are more likely to attract capital," said Daxian, a partner at Waterdrop Capital.
Moreover, the "listing effect" of leading exchanges has also significantly diminished in this round. In the past, simply being listed on a mainstream exchange could bring valuation liquidity. However, since 2025, although the number of listings on Binance has increased, the effect on secondary valuation premiums has weakened. According to CoinGecko data, the average decline of new coins in the first 30 days post-TGE in the first half of the year exceeded 42%. At the same time, investment exits have also seen new paths, such as compliant ETFs/tokenized funds (DAT), or structured secondary liquidity projects like protocol buybacks and ecological funds.
"This transformation does not mean that 'speculation has disappeared,' but rather that the speculation window has shortened, with Beta returns giving way to Alpha selection," Jack stated.
The Dilemma of VCs
The current dilemma of crypto VCs can be summed up in one phrase: not making money.
Crypto analyst KK candidly pointed out that the first issue is that crypto VCs are currently in a lagging position within the crypto ecosystem. A project's lock-up period for VCs is 1-3 years, but due to the rapid changes in the crypto industry's narratives, by the time the lock-up ends, the narrative-driven projects may have already passed their peak, with token prices plummeting, even nearing zero. Some projects may even announce their demise before they even get listed.
Additionally, many crypto VCs acquired too many overvalued projects in the last cycle, and now, with the logic being debunked, actual revenue and other data cannot support the high valuations.
"At that time, many VCs bought into some overseas projects at high prices, partly because they thought higher valuations were more stable, and partly because investing alongside well-known overseas investment institutions would enhance their brand reputation. But now it seems that many have incurred losses," KK said.
Most importantly, crypto VCs lack bargaining power. "Essentially, they can only provide money," Yinghao said.
One interviewee even bluntly stated: "In this market, the money from VCs is less valuable than that of a Twitter KOL."
What do projects need the most?
Not just money, but "liquidity resources."
Market makers can create depth in the secondary market, the listing on exchanges directly determines whether project parties can exit liquidity, and KOLs can help project parties sell tokens faster for cashing out… These liquidity participants often take the cheapest chips first and then resell them to VCs at several times the valuation. The result is: crypto VCs spend the most money but get the worst prices.
Thus, an absurd phenomenon has emerged: crypto VCs have become the group with the least bargaining power in the crypto market, inferior to exchanges, market makers, and even KOLs.
The "king of capital" in the primary market has instead become the "end of the ecological chain" in the crypto industry.
The Fundraising Dilemma
If "not making money" is the survival dilemma for VCs, then "not being able to raise funds" is a life-and-death crisis.
According to PitchBook data, the total global crypto VC financing in Q2 2025 was only $1.97 billion, a 59% quarter-on-quarter decline, starkly contrasting with the peak of over $10 billion in a single quarter in 2021.
Why are many traditional LPs no longer injecting capital? Besides the lack of returns from projects they invested in during the last cycle, having suffered losses, there is also the fact that "there are simpler ways to make money in the crypto space," Daxian stated, "for example, buying mainstream coins, DeFi mining, options arbitrage, etc., with average returns exceeding 30%. This makes it very difficult to persuade LPs to invest in VCs, which require years to exit and are likely to incur losses."
On the other hand, the capital sources are also changing.
Jack observed that traditional dollar LPs are shrinking, replaced by Middle Eastern sovereign funds, such as Mubadala and QIA, as well as Asian family offices. Particularly in Singapore and Hong Kong, many family offices are allocating crypto secondary and early equity through multi-strategy funds.
However, these emerging LPs are more selective:
They want to see real cash flow and are no longer willing to pay for PPTs; they require compliant custody, auditing, and fund licenses to avoid regulatory scrutiny; they prefer hybrid funds that bind secondary and primary investments, allowing for short-term realization of some returns…
The harsh reality is that money is increasingly concentrated in a few top players.
"Unless they have extremely strong vertical differentiation or key resources, it is more difficult for small and medium funds to attract LPs," Jack said.
The fundraising difficulty is particularly fatal for native crypto VCs. On one hand, they need to continuously raise funds externally, while on the other hand, they lack industrial synergy resources to empower them. For VCs with backgrounds in exchanges or market makers, or those using their own funds, they not only have money but also industrial resources, giving them greater confidence to acquire cheap chips. However, native crypto VCs have to navigate this life-and-death challenge.
To put it more bluntly: in this market, LPs do not lack investment opportunities; they lack certainty, and native crypto VCs simply cannot provide that.
Where to Break Through?
Although the current state of the primary market is dire, players still in this market firmly believe that this is merely a period of growing pains. Once the reshuffling is over, only those who remain at the table will be qualified to reap the fruits of success.
They remain optimistic about the future.
"There are new opportunities being nurtured in the current transformation," Daxian said, "for example, stablecoins. Some predict that the issuance of stablecoins will exceed $3 trillion in the future, and around this $3 trillion in settlement, clearing, and compliance services, a new batch of targets will inevitably emerge. This is an opportunity for crypto VCs to position themselves in advance."
The macro narrative is equally enticing. According to the Citi GPS 2024 report, it is expected that by 2030, the scale of tokenized assets could reach $10-16 trillion. Whether it is on-chain settlement platforms or the issuance side of real-world assets (RWA), both provide entry points for VCs.
"And in every cycle, new opportunities arise around new assets, whether it is trading platforms, financial derivatives, or innovative DeFi projects, all inject vitality into the market," Yinghao stated.
However, if crypto VCs want to survive in this game, they must completely reshape their roles.
They can step out of the identity of pure financial investors, providing market-making, compliance, and liquidity support, or even directly entering project operations. This model resembles "investment banking" rather than traditional VC.
Alternatively, they can create structured funds, using financial engineering methods like DAT, PIPE, SPAC, etc., to design diverse exit paths for LPs, transforming "uncertain narratives" into "predictable cash flows."
They must also establish genuine research and data capabilities, focusing on quantifiable metrics such as on-chain revenue, user retention, and protocol fees, rather than continuing to bet on the next "empty narrative."
These directions may be the last chips for crypto VCs.
However, the irony of history is that those who can truly survive are often those who endure the most difficult environments. The "Weightlessness Era" of crypto VCs may be nurturing the birth of the next star.
After all, only those players who still stand amidst the ruins are qualified to welcome the next bull market.
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