Crypto is never a belief, just a footnote of the cycle.
Written by: Ada & Liam, Deep Tide TechFlow
“All in Crypto”!
In 2021, Shen Nanpeng, the head of Sequoia China, typed a few words in a WeChat group, and the screenshot was quickly forwarded to countless investment groups, like a war drum, pushing the market's enthusiasm to a higher point.
At that time, the market atmosphere was almost euphoric. Coinbase had just gone public on Nasdaq, and FTX was hailed as the “next Wall Street giant.” Almost all classical VCs were scrambling to label themselves as “crypto-friendly.”
“This is a technological wave that happens once every thirty years,” some described. Sequoia's declaration became the most iconic footnote of that bull market.
However, just four years later, this statement sounds ironic. Many institutions that once vowed “All in Web3” have either quietly exited, sharply contracted, or turned to chase AI.
The capital's repeated jumps are essentially a cold reminder of the cycle.
How are those classical Asian VCs who ventured into Web3 back then faring now?
Pioneers of the Wild Era
In 2012, Coinbase was just established, and Brian Armstrong and Fred Ehrsam were merely a pair of young entrepreneurs in San Francisco. At that time, Bitcoin was still seen as a geek's toy, priced at just a few dollars.
At a YC roadshow event, IDG Capital cast an angel round vote for Coinbase, and by the time Coinbase landed on Nasdaq in 2021, the return on this investment was estimated to be in the thousands of times.
The story in China is equally exciting.
In 2013, OKCoin received investments from Tim Draper and Mai Gang; the same year, Huobi also secured investment from ZhenFund, and the following year received a bet from Sequoia China. According to information disclosed by Huobi in 2018, Sequoia China held a 23.3% stake in Huobi, making it the second-largest shareholder after founder Li Lin.
Also in 2013, Cao Dayong, a partner at Lightspeed Venture Partners, introduced Bitcoin to a person named Zhao Changpeng for the first time at a poker table, saying, “You should dive into Bitcoin or blockchain entrepreneurship.”
Zhao Changpeng sold his house in Shanghai, went all in on Bitcoin, and the rest is history. He founded Binance in 2017, and in just 165 days, Binance became the world's largest cryptocurrency spot trading platform. Zhao Changpeng later became the richest Chinese person in the crypto world.
Compared to the other two exchanges, Binance's early financing journey was not smooth, mainly receiving investments from Kuaidi Dache founder Chen Weixing's Fancheng Capital, R&F Properties' Zhang Liang's Black Hole Capital, and several internet and blockchain founders.
A small story is that Sequoia China had a chance in August 2017 to acquire about 10% of Binance at an $80 million valuation, but this investment was not completed due to reasons on Binance's side. Subsequently, Sequoia Capital even sued Binance, and the two sides had a rather unpleasant dispute.
Also in 2014, angel investor Wang Lijie invested 200,000 RMB in the domestic blockchain NEO (Antshares), becoming the most important investment of his life.
From 2012 to 2014, when crypto-native VCs were still in their infancy, classical VCs supported half of Web3. Whether it was the three major exchanges or Bitmain, imToken… behind them were traditional capital figures like Sequoia Capital and IDG.
Everything went crazy in 2017.
Under the ICO wave, countless tokens surged, and Wang Lijie, who had already made a significant profit, chose to sell NEO at a price of 1.5, only to see NEO's momentum continue, peaking at over 1,000 RMB, with a cumulative increase of over 6,000 times in three years.
Stimulated, Wang Lijie began to bet wildly on blockchain, claiming, “I sleep at one in the morning and get up at five, meeting project parties and reading white papers from morning till night, averaging $2 million worth of Ethereum invested daily.” So much so that when someone invited him for tea, he said, “You are wasting my time to make money.”
In January 2018, at a blockchain summit in Macau, Wang Lijie stated: “In the past month, I earned more than in the past seven years.”
Also in early 2018, ZhenFund founder Xu Xiaoping published a “do not share” speech in a 500-person internal WeChat group, stating that blockchain is a great technological revolution where those who follow will prosper and those who resist will perish, and called on everyone to learn and embrace this revolution.
Their speeches became the most well-known peak markers of that bull market cycle.
In 2018, the ICO bubble burst, and thousands of tokens' prices approached zero, with once-celebrated star projects' market values evaporating. Bitcoin also fell from nearly $20,000 to just over $3,000, a drop of more than 80%.
By the end of that year, the crypto circle became a dirty word in the investment circle.
“At that time, at a venture capital event in Beijing, a certain VC partner joked, ‘If your startup fails, it’s okay, you can just issue a token,’ and the audience burst into laughter, but I felt embarrassed,” recalled former blockchain entrepreneur Leo.
In the second half of 2018, the entire industry seemed to be pressed on pause. The once vibrant WeChat groups fell silent overnight, and project discussion groups were filled with links to Pinduoduo's cut-a-deal feature. By March 12, 2020, the market experienced a brutal blow, with Bitcoin's price dropping by 50%, as if it were the end of the world.
“Don’t say classical VCs looked down on the crypto circle; I felt at that time that the industry was gone,” Leo said.
Whether entrepreneurs or investors, they were all treated as jokes by the mainstream narrative. Just as Sun Yuchen recalled, he would never forget the way Wang Xiaochuan looked at him with the eyes of a “fraud.”
In 2018, the crypto circle fell from the center of wealth creation myths to the very bottom of the disdain chain.
Classical VCs Re-enter
Looking back, March 12, 2020, was the darkest valley for the crypto industry in nearly a decade.
The blood-red candlesticks flooded social media, and people thought this was the final blow, that the industry would end here.
But the turnaround came unexpectedly and violently. The Federal Reserve's flood of liquidity pushed the once-dying market to the forefront. Bitcoin soared from its low point, increasing more than sixfold in a year, transforming into the most dazzling asset post-pandemic.
However, what truly made classical VCs reassess the crypto industry was perhaps Coinbase's listing.
In April 2021, this exchange, established nine years earlier, rang the bell on Nasdaq. It proved that “crypto companies can also go public” and allowed early investors like IDG to reap returns in the thousands of times.
The sound of Coinbase's bell echoed between Wall Street and Liangmaqiao. According to crypto journalist Liam, many classical VC practitioners approached him afterward for offline discussions to understand the overall situation of cryptocurrencies.
But in Leo's view, the return of classical VCs was not just due to the wealth effect.
“This group of people naturally wears an elite mask; even if they secretly bought some coins during the bear market, they wouldn’t publicly admit it,” he said. What truly helped them take off the mask was the upgrade of the narrative: from Crypto to Web3.
This was a conceptual transformation vigorously promoted by Chris Dixon, head of a16z crypto. Directly saying “invest in cryptocurrencies” was seen by many as equivalent to speculation, while changing the term to “invest in the next generation of the internet” immediately added a sense of mission and moral legitimacy. By lamenting the monopolies of Facebook and Google and emphasizing decentralization and fairness, they could garner support and applause. The craziness of DeFi and the explosion of NFTs could easily fit into this grand narrative framework.
The popularization of the Web3 narrative allowed many classical VCs to shed their moral burdens.
Will, a crypto fintech investor at a leading institution, recalled: “We experienced a cognitive shift. Early on, we viewed it as an extension of the consumer internet, but that logic was debunked. What truly changed our perspective was fintech.”
In his view, the timing of the Web3 hype coincided perfectly with the tail end of the mobile internet and the early stages of AI. Capital needed a new story, so blockchain was forcibly shoved into the internet framework; but what truly helped the industry escape the death spiral was the awakening of its financial attributes. “Look at successful projects; which one isn’t related to finance? Uniswap is an exchange, Aave is lending, Compound is wealth management. Even NFTs are essentially the financialization of assets.”
Another catalyst came from FTX.
Founder SBF emerged as a “financial genius boy,” almost capturing the hearts of all major classical VCs. His positive persona and rapidly expanding valuation ignited FOMO among global VCs.
At a venture capital gathering in Beijing, investment moguls were once inquiring everywhere about “who could buy old shares of FTX and Opensea,” enviously eyeing those lucky enough to have already purchased them.
During this period, an interesting phenomenon also emerged: the talent flow between classical VCs and crypto VCs.
Some left Sequoia and IDG to join emerging crypto funds; others transitioned from crypto VCs to traditional institutions, directly taking on the title of “Web3 Head.” The two-way flow of capital and talent allowed the crypto market to truly enter the narrative of mainstream investors for the first time.
The bull market of 2021 was like a carnival.
WeChat groups were bustling, and unlike before, this time they included classical VCs, family offices, and people from major internet companies.
With NFTs gaining momentum, VC bigwigs changed their avatars to monkeys, Punks, and other high-value NFTs. Even Zhu Xiaohu, who once sang the blues about cryptocurrencies, switched to a monkey avatar. At offline conference venues, alongside crypto-native entrepreneurs, elite classical VC partners also began to appear.
Classical VCs entered Web3 in various ways: directly investing in crypto projects, causing valuations to soar; investing in crypto VCs as LPs, with Sequoia China, which once had a legal dispute with Binance, becoming an LP of Binance Labs after both parties reached a settlement; directly buying Bitcoin in the secondary market…
Crypto VCs, classical VCs, exchanges, and project parties intertwined, continuously pushing project valuations higher, with everyone anticipating an even more glorious bull market. But behind the noise, risks were quietly brewing.
VCs Fall
If the bull market of 2021 was heaven, then 2022 instantly turned into hell.
Success came from FTX, and failure also came from FTX. The collapse of LUNA and FTX not only destroyed market confidence but also directly dragged a number of classical VCs down with it. Institutions like Sequoia Capital and Temasek suffered heavy losses, and Temasek, as a state-owned capital, was even held accountable in the Singapore Parliament.
After the bull market bubble burst, many once-overvalued crypto projects were brought back to reality. Unlike the “fractional” probing of crypto-native VCs, classical VCs were accustomed to making large bets, with single investments often reaching tens of millions of dollars. They also purchased a large number of SAFTs from crypto VCs, becoming an important source of exit liquidity for crypto VCs in the previous cycle.
What chills classical VCs even more is the rapid change in the narrative of the crypto industry, which exceeds their investment logic. Projects that were once highly anticipated can be completely abandoned by the market just months later, leaving investors with only deeply trapped equity and liquidity dilemmas.
The Ethereum L2 track is a typical case. In 2023, Scroll completed financing with a valuation of $1.8 billion, with Sequoia China and Qiming Venture Partners on the investor list. However, on September 11 of this year, Scroll announced a pause in DAO governance and the resignation of its core team, with a total market value remaining at only $268 million, resulting in an 85% loss for VC investments.
At the same time, the strong position of exchanges and market makers makes VCs appear increasingly redundant.
Investor Zhe bluntly stated: “Those projects valued at $30-40 million that can eventually list on Binance can still make some money, locking in two to three times after the lock-up period ends. If it’s even slightly more expensive, it can only list on OKX or smaller exchanges, which means a loss.”
In his view, the logic of making money is no longer related to the project itself but depends on three things:
Whether it can list on Binance;
Whether the chip structure is favorable;
Whether the project party is willing to “feed the meat.”
“After all, exchanges have the most say and can eat the biggest piece of meat. How much is left to share depends on luck.”
Zhe's words express the pain of many classical VCs.
They find that their role in the primary market increasingly resembles that of “movers”: spending money to invest in projects, only to have the greatest value harvested by exchanges, leaving them with only the leftovers. Some investors even lamented: “Actually, there’s no need for the primary market now; project parties can make money by listing on Binance Alpha themselves. Why should they still share profits with VCs?”
As the logic of capital becomes ineffective, the focus of classical VCs has also shifted. As Will said, the heat of Web3 coincided with the tail end of the mobile internet and the early stages of AI, marking a “gap period,” and when ChatGPT emerged, the true North Star appeared.
Funds, talent, and narratives suddenly changed direction, rushing towards AI. In WeChat circles, VC practitioners who once actively shared Web3 financing news quickly switched to the identity of “AI investors.”
According to former classical VC investor Zac, during the peak of the industry from 2022 to 2023, many classical VCs were looking at Web3 projects, but now, 90% of them have stopped. He also predicts that if the primary market for cryptocurrencies in the Asia-Pacific region remains as quiet as it is now for another six months to a year, even more people will give up.
No More High-Stakes Gambling
The Web3 primary market in 2025 looks like a shrinking chess game.
The excitement has faded, leaving only a few players, but the landscape is being reshaped in the background.
As a bellwether for classical VCs, the movements of Sequoia Capital are still worth paying attention to.
According to data from Rootdata, Sequoia China has cumulatively invested in seven projects by 2025, including OpenMind, YuanCoin Technology, Donut, ARAI, RedotPay, SOLO, and SoSoValue. Following them are IDG Capital, GSR Ventures, and XVC, while the previously active Qiming Venture Partners' last Web3 investment was in July 2024.
According to Zac's observations: “Now, you can count on one hand how many classical VCs are still looking at Web3 projects.”
In his view, the quality of crypto projects has seriously declined.
“Efforts to find PMF and teams that create long-term value for users receive far less positive feedback than those studying the attention economy and actively market-making,” Zac said.
Additionally, crypto treasury companies represented by MicroStrategy and BMNR have become a new investment option, but this has again created a vampiric effect on the increasingly depleted crypto primary market.
“Do you know how many PIPE projects are out there now?” asked Wang Yuehua, a partner at Draper Dragon. “At least 15, each needing an average of $500 million. That’s $7.5 billion. Most of the big funds in the market are on Wall Street, and they are participating in PIPEs.”
PIPE (Private Investment in Public Equity) refers to the issuance of stocks or convertible bonds by publicly listed companies to specific institutional investors at a discounted price for rapid financing.
Many publicly listed companies that were originally unrelated to cryptocurrency have obtained large financing through PIPEs, then purchased large amounts of BTC, ETH, SOL, and other assets, transforming into crypto treasury companies. Investment companies that enter at a discounted price often reap substantial profits.
“This is why there’s no money in the primary market,” Wang Yuehua said. “Big funds are all playing with the more certain PIPEs; who would still be willing to take risks investing early?”
Some leave, while others hold firm. Will still chooses to believe and persevere; he believes in Web3, in AI, and is even willing to invest in seemingly “non-commercial” public goods.
“Not everyone has to do business,” Will said. “Truly great projects often start from a simple public good. Just like Satoshi Nakamoto created Bitcoin, he didn’t pre-mine or raise funds, but created the most successful financial innovation in human history.”
The Dawn of the Future
Several major events happening in 2025 are changing the rules of the game.
Circle's listing is like a spark, igniting stablecoins and RWA (Real-World Assets) together.
This stablecoin issuer landed on the NYSE with a valuation of about $4.5 billion, providing classical VCs with a long-awaited “non-tokenized” exit sample. Subsequently, Bullish, Figure, and others went public, boosting confidence among more investors.
“We don’t touch pure tokens in the primary or secondary markets, but we will look at stablecoins and RWA,” multiple classical VC investors provided the same judgment. The reason is simple: there’s enough space, visible cash flow, and clearer regulatory paths.
The business model of stablecoins is more “bank-like,” with potential for sustainable profitability from reserve interest spreads, issuance/redemption and settlement fees, compliance custody, and clearing network service fees.
RWA moves receivables, government bonds, mortgages/real estate, fund shares, etc., “on-chain,” generating income from fees and interest spreads across multiple links such as issuance/matching/custody/circulation.
If the previous generation of crypto companies listed in the U.S. stock market was dominated by exchanges, mining companies, and asset management firms, then the new generation of prospectuses belongs to stablecoins and RWA.
At the same time, the boundaries between stocks and tokens are becoming blurred.
“MicroStrategy-style” treasury strategies have attracted a number of imitators, with publicly listed companies using equity financing or PIPEs to increase their holdings of BTC/ETH/SOL and turning into “coin stocks.”
Behind the leaders in this track, one can see the presence of many classical VCs like Peter Thiel, and some institutions have even entered the fray, such as Huaxing Capital announcing a $100 million purchase of BNB, choosing to participate in crypto asset allocation through the public market.
“Traditional finance is embracing crypto,” Wang Yuehua said. “Look at Nasdaq investing $50 million in Gemini; this is not just a capital move but a change in attitude.”
This shift is also reflected at the LP level. According to several interviewees, traditional LPs such as sovereign funds, pension funds, and university endowment funds are beginning to reassess the allocation value of crypto assets.
The capital history of the past decade has ebbed and flowed like the tide. Classical VCs in Asia once pushed exchanges onto the stage and shouted “All in” during the bull market, only to end up as marginal figures in the crypto world.
Currently, although the reality is bleak, the future may not be without dawn.
Just as Will firmly believes: “Classical VCs will definitely allocate more to fintech investments related to crypto.”
Will classical VCs re-enter on a large scale in the future? No one dares to assert. The only certainty is that the pace of progress in the crypto world will not stop.
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