A large number of Asian Crypto VCs have disappeared. This round truly tests cash flow, value capture, and long-termism.

Written by: Joe Zhou, Foresight News

A large number of Asian Crypto VCs have disappeared.

In the past week, I reached out to more than twenty investor friends in my contacts, and more than half have left. Some have switched to AI, some have ventured into entrepreneurship, and some funds have completely stopped investing.

If we rewind to 2021 or 2024, the Web3 investment market was once so crazy that dozens, even nearly twenty, funding news items would appear in a single day, and investments of millions of dollars became commonplace. At that time, many believed Crypto would experience explosive growth. VCs scrambled to raise funds, projects rushed to issue tokens, and entrepreneurs ran wildly.

But by the second half of 2025, the entire industry rapidly cooled down. Nowadays in the Web3 market, there are times when only one financing news item can be seen in a day. The number of VCs truly active on the frontlines and continuously betting on Web3 has become increasingly scarce.

What has Crypto VCs gone through in this cycle? During the investigation, I found several investors still active on the frontlines of Web3. Jocy, the founder of IOSG, revealed: "We still invest in 15 Web3 projects every year, with 30% being lead investments, even during a bear market. Just in the first half of this year, we completed 3 primary investments."

Nine years, three cycles of bull and bear markets, they have witnessed the industry's craziest and most bubble-like times, and have repeatedly waded through the industry's lowest valleys. In this bear market, Jocy told me that his biggest feeling is: the logic of Crypto VCs has completely changed.

The following is the account of Jocy, the founder of IOSG.

I have been a VC in Web3 for nine years, experiencing three cycles of bull and bear markets

I have been doing Crypto VC for nine years.

Since founding IOSG in 2017, we have experienced three cycles of bull and bear markets in this industry, investing in nearly one hundred projects. At that time, the entire industry was still very small. Bitcoin had just broken through $1000, Ethereum was less than $10, and most people didn't even know what "blockchain" was.

Back then, we allocated about 80%-90% of our positions in primary early-stage projects.

But now, with the changes in the crypto environment, we have gradually adjusted our investment strategy in the past two years, increasingly adding to the proportion of Post-TGE (post-token generation event) and OTC (over-the-counter) projects, resulting in an investment portfolio roughly composed of 50% primary, 30% Post-TGE, and 20% OTC.

For us, the early primary market still remains the core source of alpha. But more and more often, we find that some Post-TGE and OTC assets have evident value mispricing, and the secondary market has begun to present more cost-effective opportunities than the primary market.

At the same time, this strategy has given us better liquidity management space, allowing us to provide LPs (limited partners) with clearer DPI (distributions to paid-in) exit paths. I believe the future pattern is: VCs that can clearly articulate DPI exit routes to LPs in the top 20% will take 80% of the funds in the market, while the remaining funds will share the scraps of the remaining 20%.

We currently have a team of over a dozen people, distributed across Asia and the United States, and our strategy is always global, allowing us to keenly sense the changes in the water temperature of the industry worldwide. The current market is actually quite desolate, with good projects being extremely scarce. If you look at Silicon Valley's Web3 entrepreneurial circle, there are fewer and fewer newcomers doing pure Crypto, as a large number of talents have been drawn to the AI track.

The entire market is still in a somewhat pessimistic phase, and this pressure will not end in the short term.

Every few years, the crypto industry undergoes a round of extremely intense reshuffling, with institutions exiting, projects going to zero, sentiment plummeting from mania to dead silence, and then starting over again. For us, today is actually the best stage to re-establish industry order and redefine value.

Every round of industry lows often also marks the moment of the best projects' birth.

Many think VC is just about putting in money. But in fact, the institutions that truly stay long-term are those that can help entrepreneurs solve problems. One of our greatest accumulations over the past nine years has been our post-investment capabilities. Additionally, we've always been doing one thing: building an ecosystem. From infrastructure to DeFi, to consumer, and then to the intersection of AI and Crypto, we’ve actually been working hard to create a complete ecological map.

We hope for synergies between different projects. This is something we have always placed great importance on.

Crypto VCs are entering "Hell Mode"

At the peak of the last bull market, how crazy was the industry? A seed round project could be finalized in three days, with five institutions frantically vying for a stake, and even the same project could present three different valuations at the same time.

We have never participated in such a game. That is not called investing.

Now that the market has cooled down, it ironically gives real research-oriented institutions an opportunity. We can finally really sit down and do DD (due diligence). We can spend three weeks, instead of three days, to thoroughly analyze a project.

So this round is actually a structural opportunity for research-driven funds. Because the money in the market has decreased, good projects will actively seek institutions that can truly provide non-financial value, rather than blindly provide high valuations. Our alpha comes from deep judgment rather than the speed of obtaining allocations.

Looking around, the funds in the entire industry are shrinking.

Recently, a16z raised a $2.6 billion fund, which, although still a giant, is smaller compared to their previous round. Large institutions like Benchmark are also scaling back.

The approach of American funds is somewhat different, many having a 10-year cycle. In the last cycle, the main profits were not necessarily made by investing in good applications in the primary market, but by heavily investing in large cryptocurrencies like Bitcoin. They used substantial USD funds to push market valuations to their ceilings, but did not provide clear paths for the industry.

During the phase when the bubble burst, American funds had ample resources and many paths to choose from. But Asian funds, once pushed to high points, found themselves with no way to turn after the drop.

In the past year, the entire Asian VC fundraising market has been a sight to behold. The vast majority of VCs have had difficulty raising funds. Almost no LP claims they must allocate to Crypto VCs.

So for this round, it is an extremely painful hell mode for Asian funds.

But from another perspective, this also means Asian funds must be more precise. With limited bullets, every shot must hit. We internally emphasize: do not invest in mid-tier projects. Either invest in the Top 1 or Top 2 in the industry, or do not invest at all. Because in a bear market, the mid-tier is the most susceptible to collapse.

The biggest problem in the Crypto industry: TOKEN and value disconnect

In this cycle, we resolutely avoid several types of projects: infrastructure that only talks about narrative but lacks PMF (product-market fit), projects with excessive duplicate construction but no cash flow, and projects that rely solely on ideas without substance. The market has become completely immune to those "high FDV (Fully Diluted Valuation), low circulation" infrastructure tokens. Now if you are doing Infra, institutions are even more inclined to invest in your equity rather than tokens.

For a long time, the Crypto industry has had a major endemic problem: tokens and real value have been in a state of long-term disconnect.

In the past, many project parties played a "golden cicada shedding its shell" trick—real profitable business income and core equity were firmly locked within the actual company subject; while the issued tokens were merely treated as interest-free financing tools, liquidity outlets, or even chips to manipulate market sentiment.

In simpler terms, the protocol earns real money on-chain, yet token holders do not receive any shares of the profits, having no substantive claim to the value created by the project. This extreme misalignment of interests has seen numerous investors lose their entire investments over the past few cycles. Because what they paid for was never a true "asset," but rather an empty symbol without defined rights.

After undergoing several rounds of brutal reshuffling, the industry today has finally started to awaken: Good tokens must be capable of bearing real value.

Quality projects are actively seeking transparency, strongly binding tokens and protocol benefits, which will become a key differentiating competitive advantage in the next cycle. Projects like Uniswap, Hyperliquid, Polymarket, and the Morpho we invested in, are all vigorously promoting this trend.

For instance, Morpho publicly promises the market: the value generated by the protocol will be programmatically set to accumulate directly to the tokens, and will never flow to independent companies or equities. Likewise, after the regulatory environment in the U.S. has eased, Uniswap is also adjusting towards this trend; while Hyperliquid has demonstrated the tremendous power of "token repurchase" through actual actions.

To be frank, repurchase itself is not a perfect indicator of interest binding, but from a structural perspective, it genuinely bestows core supportive power to tokens. By continuously reducing circulating supply and establishing long-term interest ties with token holders, supplemented by a transparent and programmatic repurchase rhythm, project parties can create a solid price base for tokens. For long-term holders, these types of tokens are undergoing a qualitative change—their nature is increasingly resembling that of government bonds or interest-generating assets, with their scarcity and intrinsic value steadily increasing over time.

Only tokens that genuinely possess value capture mechanisms, have repurchase blood-generation capabilities, and bottom-supporting features are qualified to transcend bull and bear cycles, becoming a long-term financial asset rather than a mere speculative chip.

Perhaps, it is simply because the industry has hit the most painful bottom that Crypto is finally able to truly initiate this hardcore evolution of "distilling the genuine from the false."

Only during the most pessimistic times will truly great projects emerge

Over the past few years, Crypto has indeed experienced a huge "falsification" process leading to the worst outcomes: which products have no real demand? Which narratives simply cannot hold? What directions are doomed to fall short compared to Web2?

This process of falsification has buried countless amounts of money and top talents, but it has also gradually clarified the answers. For VCs, the investment logic must change fundamentally—no longer gambling on industry beta or cycles, but must return to the essence of business itself.

We no longer see Crypto as an island, but rather as "the digitization of finance." The industry has finally realized that what truly matters is never the illusory "big numbers," but the real value behind them. Now, when analyzing projects, we must break them down to extremely fine levels: rigorously scrutinize the retention rates, customer acquisition costs (CAC), and lifetime value (LTV) of consumer projects; peel apart the ARR (Annual Recurring Revenue) of released token projects, stripping out sustainable real income.

As Crypto transitions from a storytelling alternative circle to a true financial industry, a huge value gap has emerged in stark contrast to rampant enthusiasm.

In the current market, people are more willing to pay for the ethereal "imagination," yet misjudge those projects that genuinely have revenue, users, and cash flow. For example, Morpho, Sky, and even Uniswap, which recently stated it would abandon IPOs to stick with its token ecosystem. These established protocols that have experienced full bull and bear cycles have lost attention during the deep retracement of the bear market, yet their fundamentals have not worsened; instead, they have become healthier with the improvement of industry conditions and revenue capabilities.

This is also why we are now allocating about 50% of our positions to these released token projects with real revenue. We are highly focusing our resources on two directions:

• Real yield and financial infrastructure: Including stablecoin payments, settlement, neo-banks, on-chain credit. For example, our investments in Ether.fi, Morpho, Centrifuge, and RedotPay, which have extremely clear user demands and positive cash flow.
• The intersection of AI and Crypto: We have reserved 20% to 30% of our firepower, not investing in general large models, but rather absolutely focusing on crypto-native AI infrastructure (such as data training and collection).

Facing this chaotic and violent reshuffle, as VCs, we must also evolve. Now, every colleague internally is equipped with a dedicated AI Bot to take over tedious data backtesting and cross-timezone coordination. However, engaging with people and making fundamental human judgment remains our irreplaceable moat.

After nine years, my biggest feeling is: truly great companies are almost never born during the most bustling times, but rather when many believe the industry is finished.

In this period filled with layoffs, disillusionment, and confusion, many are leaving, even starting to doubt whether Web3 still has a future. But only during the low times will you be forced to think: what do users truly need? What can endure long term?

I still believe that what is truly important in this industry has only just begun. After the bubble bursts, the remaining individuals will truly determine what the next round of the world will look like.