Original | Odaily Planet Daily (@OdailyChina)

Author | Azuma (@azuma_eth)

Who knows the status of the cryptocurrency primary market best? Naturally, it is those VCs still active in the market.

In recent days, several investors from Pantera Capital, Crucible Capital, Blockworks, and Varys Capital have had a small-scale discussion on X regarding the current state of the primary market in the industry. Although there are certain discrepancies in their views on the market situation, their debates might help us gain a better understanding of the primary market status.

Counterintuitive Reality: VCs Are Not Lacking Funds, But There Are Few Worthwhile Investment Opportunities

On the evening of April 20, Meltem Demirors, a partner and GP at Crucible Capital, published a short article on X explaining why the number of funding rounds in the cryptocurrency industry has significantly decreased.

Demirors believes that, overall, the "supply side" of early founders and projects in the cryptocurrency industry is not as large as that of other high-growth industries. This gap has become increasingly apparent over the past four years, which is why this VC has begun shifting its focus away from the cryptocurrency market.

The venture capital business in the cryptocurrency market has developed for ten years, but the truly validated directions that can generate "VC-level returns" are actually just a few—stablecoins/payments, exchanges, financial products. For VC investors and leading founders, the hits in this industry are fewer and the cycles are longer, thus requiring higher levels of industry understanding, stress resilience, and long-term thinking; hence the thresholds for moving from seed rounds to Series A are also rising.

Although there are still some "epoch-making" founders in the industry building category-defining companies (the job of VCs is to find them and win the opportunity to invest), the current reality is that there exists a clear gap between the stories founders tell and the things VCs can reasonably invest in.

After Demirors’ short article was published, it sparked discussions among many VC peers on the topic.

Several investors replied below to express their agreement with Demirors' views. Among them, Blockworks co-founder Mippo summarized in a follow-up that he agrees with Demirors, stating that the current issue in the primary market is the insufficient number of excellent founders and projects, and actually, VCs have more than enough funds to invest—yet at the same time, early-round VC funds are in surplus, but there is still a significant lack of funds focused on later-stage growth.

Local Discrepancies: Where Is the Money Concentrated?

Regarding whether VC funds are concentrated in early discovery stages or later growth stages, opinions between Pantera Capital investor Mason Nystrom and Varys Capital venture capital manager Tom Dunleavy are completely opposing, and both sides have engaged in an intense debate on this matter.

Dunleavy first stated that he disagrees with Mippo’s view on "excess early funds and insufficient late funds": "I will hold the exact opposite view. There is actually a lot of capital in later-stage cryptocurrency VCs now—most of it comes from recently raised funds, such as Paradigm, Multicoin, Pantera, Dragonfly, etc., not to mention those traditional VCs partially involved in the cryptocurrency market, rather, it is the funds focused on early rounds that are lacking.... As long as you haven't completely shifted your focus to AI, there are actually many interesting projects to invest in."

However, as an insider from one of the mentioned later-stage VCs (Pantera), Nystrom strongly refuted Dunleavy's statement. He believes that the capital among industry VCs is more concentrated in the early stages, rather than Series A, Series B, or even later.

Nystrom calculated that if a fund wants to focus on Series A or Series B financing, they need to invest in at least 20-25 projects, each requiring a large investment—approximately $15 million for Series A and about $40 million for Series B—based on this calculation, a fund focusing on Series A needs at least $300 million in assets under management, and a fund focused on Series B needs at least $800 million. This does not account for reserved funds, which typically require 10% - 50% of cash on hand; how many funds in the industry meet this requirement?

So the reality is that there may be at least 50 funds with asset management scales under $100 million in the industry, while there are only about 15 funds with scales exceeding $400 million. There are very few major players in the industry who can participate in Series B or later rounds; while there may indeed be more Series B and later-stage funds in the fintech sector (such as stablecoins), these projects have actually "graduated" into the traditional VC system and can no longer be simply viewed as cryptocurrency market projects.

But Dunleavy has not been persuaded. In his response, he shared Galaxy's Q1 primary market financing report and noted that in Q1 of this year, the total number of industry financing rounds dropped by 49%, but the average amount raised per round increased by 76% (approximately $36 million)—the total financing amount for seed rounds and earlier was only $268 million; Series A saw $370 million; Series B was as high as $1.1 billion; and later rounds reached a staggering $2.72 billion (mainly from Kalshi and Polymarket).

Dunleavy countered that the data proves over 50% of the industry's investments flow to later stages in 2025 (a historical high), reaching over 80% by 2026.

Dunleavy finally estimated the current capital status in the primary market—there is approximately $6 billion to $7 billion in available capital for Series A and later stages, concentrated in 5 to 6 large institutions; while available capital for seed rounds and earlier stages is around $1 billion to $2 billion, distributed across dozens of smaller, more dispersed funds.

Nystrom then responded again, stating that among the data Dunleavy provided, the vast majority of later-stage investments actually come from fintech-related projects that have "graduated" and these projects have long since entered the traditional VC view and obtained investments, hence should not be included in the industry statistics.

Nystrom further rebutted Dunleavy's conclusion of "only 5-6 funds can invest in Series A or later, but dozens of funds can invest in seed rounds", stating: "This means if you can't convince one of those 6, you're pretty much out of luck; but in the early stage as long as one out of dozens of funds is willing to invest, you can survive. The 'accessibility' of the two is completely unequal."

Additionally, funds like Pantera Capital that are capable of investing in mid to late stages will also invest in seed rounds, but the reverse is not true. Coupled with the trend of more VCs becoming liquid funds, the actual scale of funds that can invest in the later stages is much smaller than the figures suggest.

Compared to "Is There Money?", The Real Question Is "Where Is the Money, and Can It Be Accessed?"

In short, neither side could convince the other, but based on the direct confrontation between these two leading investors, we gain further insight into the reality of the cryptocurrency primary market—"Is there money?" does not seem to be the central issue in the primary market; rather, "Where is the money, and can it be accessed?" is.

From surface-level data, industry funding is still abundant, and even shows a high concentration in later rounds; but from the perspective of actual experience, both VCs and entrepreneurs are facing a more "structurally tightened" market—early-stage funds seem dispersed but are highly competitive, while mid to late-stage funds seem ample but have extremely high thresholds. This also means that the rules of the game in the primary market are changing. The past era, which relied on narrative, traffic, and short cycles to complete funding loops, is rapidly fading; in its place is a financing environment that depends more on the real progress of business, long-term capabilities, and defined growth paths.

For VCs, this is a cycle of "fewer actions, heavier judgments"; for entrepreneurs, it is a survival test that must cross longer cycles and higher thresholds.

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