Is “VC Dead” real or just a sentiment? What do industry insiders think of this wave of recession
Author: Golden Finance
Original title: Are crypto VCs about to die out? What do industry insiders think?
Recently, the coin community has sparked a discussion about “whether crypto VC has died out”.
Galaxy Research's latest venture capital report shows that in the second quarter of 2025, cryptocurrency and blockchain startups raised a total of $1.97 billion in 378 deals. Compared with the previous quarter, the amount of funding fell 59% and the number of transactions fell 15%. This is the second-lowest quarterly total since the fourth quarter of 2020.
Independent researcher Haotian pointed out, “In four years, VCs haven't even found a sustainable investment model; leading VCs can get the best terms, the lowest price, and an early exit opportunity, while most small and medium-sized VCs follow suit and are treated as successors by large institutions; most VCs are “big leeks,” and basically rely on the diversity of portfolios to gamble on probability; the market is looking for a possibility that VC is not needed.”
What do industry insiders think about the demise of crypto VCs? Is VC really dying out in the coin industry?
1. Crypto VC Fails to Waterloo
A joint study by Chainplay and Strorible revealed that of the 1181 crypto projects that were venture-funded between January 1, 2023 and December 31, 2024, nearly 45% have been suspended, and 77% have a monthly income of less than $1,000.
In terms of venture capital institutions, Polychain Capital had the highest investment failure rate, 44% of participating projects were terminated, and 76% of the projects did not generate effective revenue; Yzi Labs (formerly Binance Labs) supported projects with a failure rate of 72%; top venture capital firms such as Circle, Delphi Ventures, Consensys, and Andreessen Horowitz also suspended a large number of support projects, and many failed over two-thirds of the projects.
Among angel investors, former Coinbase CTO Balaji Srinivasan “zombie project” topped the list with 57%; Arthur Hayes at 34%, Santiago Santos at 15%, and projects supported by Sandeep Nailwal and Stani Kulechov each ceased operations at 10%.
The data showed a significant correlation between the size of funding and the success rate. Projects with financing over $50 million have a significantly lower failure rate, while 33% of projects with less than $5 million in financing have failed and 20% have ceased operations.
2. VC is more rational
Jademont, Founding Partner and CEO of Waterdrip Capital, stated, “Why are VCs disappearing? You can take a look at the top CEX listing announcements in the past two years. It only tells you the letters XXX will be listed. Let's take a quick gamble without wasting a single word to explain why this project was launched and what this project does. Many retail investors have been playing games with dog stores for a few months, and they don't even know what the target of their trade is, let alone use the product. CEX has been heavily gamified, and even casinos occasionally come out of nowhere.
It is said that the top criteria currently assessed by CEX are community popularity, whether market funding is sufficient, and whether they are willing to donate enough free chips. If the above conditions are true, then the existence of VC really doesn't make much sense. Because most VCs are unable to help the project party become a community, they are unwilling to help the project side to trade and gamble with retail investors.
So instead of saying VC is about to die out, VC has made a different choice. But first, I don't want to publicize it. Because advertising has no practical meaning other than doing PR. Even when the project side messes up, they will be scolded by the community. You need to know that even if the team takes responsibility for early projects, the probability of being ruined is already very high. Why don't we wait until the project gets bigger and then tell the market that I invested in this project. Second, many projects have no plans to issue coins at all, or do not do retail business, so there is no need for publicity. Just wait for the launch to ring the bell and celebrate. Looking at the schedule below, at least 3-5 early-invested projects will go to Nasdaq next year. Starting a business now isn't just about issuing coins as an exit path.”
Sylvia To, director of Bullish Capital Management, said: Cryptocurrency venture capitalists are reducing their risk appetite, avoiding the month's hot topics, and taking a more critical look at investing. “You really have to start thinking, the industry is building this infrastructure, but who is using it? Is there enough trading volume? Is the volume of transactions generated through these blockchains sufficient to justify all the money raised?”
In 2025, many projects are being funded at excessive and often unreasonable valuations, relying heavily on future cash flow forecasts.
3. Talk about changes in capital flows
The long-term correlation between Bitcoin price and VC no longer exists and is “difficult to recover.” This disconnect is due to the waning interest of venture capitalists and the market's increasing emphasis on Bitcoin accumulation over other investments.
专注于加密货币的风险投资难以恢复到 2021 年的高点。来源：Galaxy Research
Insights4VC data shows that capital flows have changed. Digital asset finance companies (the main tool to raise capital to buy cryptocurrencies) have attracted most of the investment this year, and as of August 21, they have attracted $15 billion to increase their holdings of Bitcoin, Ethereum, and other tokens.
The differences between large capitalists hoarding cryptocurrencies and startups seeking venture capital reflect changes in investor mentality. Bitwise CEO Hunter Horsley said that a growing number of supporters are demanding a clearer path to profit and a sustainable business model. The quest for yield is driving Wall Street's investment in Ethereum. “If you take out a billion dollars in ETH, put it in a company, and then stake it, all of a sudden, you start making a profit. Investors are used to profitable companies.”
Nick Tomaino, founder of 1confirmation, once stated in an article on the X platform that the rise of Ethereum means “the death of crypto VCs”. 99% of crypto VCs will soon die out. The right place, the right time, access to institutional capital, have no vision or creativity, and being consistent with users is the only way to develop for a long time.
4. Market maturity statement
Eva Oberholzer, chief investment officer at venture capital firm Ajna Capital: Venture capital firms have become more picky about the crypto projects they invest in, which shows a shift from the previous cycle due to market maturity. “We've reached a different stage in cryptocurrency, similar to every cycle of other technologies we've seen in the past.”
Market maturity has slowed pre-seed investment as venture capital firms turn their attention to mature projects with clear business models. “It's more about predictable revenue models, institutional dependency, and irreversible adoption. So, what we're seeing now is that cryptocurrencies aren't driven by any meme coin craze or other trend, but more about institutional adoption. Currently, venture capital firms are focusing on stablecoin projects and investing in other forms of payment infrastructure that can generate fees.”
The shift in venture capital activity reflects a broader trend in institutional cryptocurrency investment and a focus on income-generating digital asset businesses, rather than price speculation that drove investment in previous cryptocurrency cycles such as the 2021 bull market.
5. The future of VC
Trader Tong Jun Jun pointed out, “In the last round of the bull market, VC is a dream factory that tells stories, drives valuations, and sells to level 2. In this round, they discovered that they had instead become the group that was cut off by market makers and traffic. When the so-called investment logic collapsed, the right to speak was actually taken back. Today's VCs are no longer investing in projects; some are becoming market makers, others are incubating, and more people are learning the way investment banks do and live on liquidity and commissions.”
Quantitative trader Ares pointed out that the role of VC in traditional industries is nothing more than providing capital + resource support, which is particularly effective in an environment where traditional industries have difficult financing and strict listing. In the coin industry, the environment seems to be very different; the difficulty of financing is quite different from the requirements of going to an exchange. Therefore, VC must also make corresponding changes to adapt to the investment and financing environment in the crypto industry. I think in the future, VCs in the crypto industry will be divided into two categories: leading exchange VCs — which basically means queuing up; VCs with huge traffic — such as a16z, understand how to play in the coin industry, are good at marketing, and can spare no effort.
According to Galaxy Research, in Q2 2025, the mining category attracted a large amount of money (about $300 million or more) — this is the first time in recent years that the mining category received the highest share. In the same period, categories such as exchanges, lending, Web3, NFTs, gaming, DAO, metaverse, and infrastructure still occupied a large number of investment projects. VC activity remains active and healthy in general. Fields such as artificial intelligence, blockchain infrastructure, and transactions continue to attract transactions and capital, and pre-seed financing activities have remained stable.
epilogue
Thirty years of Hedong and thirty years of Hexi, crypto VC, which drove the pace of the previous bull market, fell cold in this cycle. VC rationalization, changes in capital flows, maturity in the crypto market... No matter what statement market participants agree with, maybe the era of VCs lying down and making money is really over. What VCs should do is not to clarify “whether they are still alive,” but to prove “I am living better” with practical actions.
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