Analysis of the Three Major Trends in Crypto Venture Capital: The Rise of Token Dominance and Liquidity Investment

The current financing environment has become increasingly severe, mainly influenced by the challenges faced by upstream allocated capital returns and limited partners' funding. Throughout the venture capital sector, the funds returned to limited partners by funds at all stages have significantly decreased compared to previous years. This trend has led to a reduction in available funds for investment by both existing and newly established venture capital firms, further exacerbating the difficulty of financing for founders.

This situation has had a significant impact on the encryption venture capital sector. In 2025, although the number of transactions has slowed down, the pace of capital deployment is basically on par with that of 2024. The decrease in the number of transactions may be related to many venture capital funds nearing the end of their life cycles and a reduction in available funds. However, some large funds are still conducting larger transactions, so the overall pace of capital deployment remains consistent with the previous two years.

Over the past two years, M&A activities in the encryption sector have continued to improve, providing more liquidity and exit opportunities for the industry. Recently, several large M&A cases have occurred, involving multiple well-known companies, which not only promoted industry consolidation but also provided more assurance for exits in crypto equity venture capital.

In the past year, although the overall trading volume remained stable, there were some larger late-stage transactions in the fourth quarter of 2024 and the first quarter of 2025. This is mainly because more transactions are concentrated in the early stages, such as pre-seed rounds, seed rounds, and accelerator stages, where capital is relatively abundant.

Divided by financing stages, accelerators and launch platforms rank first in the number of transactions. Since 2024, a large number of accelerators and launch platforms have emerged in the market, which may reflect that in a tightening financing environment, founders are more inclined to issue Tokens early to initiate projects.

The median size of early financing rounds has rebounded. The scale of pre-seed financing has continued to grow year-on-year, indicating that funding in the earliest stages remains abundant. The median financing for seed rounds, Series A, and Series B has approached or rebounded to the levels of 2022.

Three Major Predictions for Encryption Venture Capital

1. Tokens will become the primary investment mechanism.

The market will shift from a "token + equity" dual structure to a model of "single asset carrying value". In the future, one asset will correspond to a set of value accumulation logic.

2. The integration of fintech venture capital and encryption venture capital is accelerating.

An increasing number of fintech investors are transitioning to become encryption investors, focusing on next-generation payment networks, new digital banks, and blockchain-based asset tokenization platforms. This creates competitive pressure on encryption venture capital, especially for those who have not laid out in the stablecoin or payment sectors, as they may find it difficult to compete with fintech venture capital that has rich payment experience.

3. The Rise of "Liquid Venture"

"Liquidity Venture Capital" refers to seeking investment opportunities similar to venture capital in the market of tradable tokens. This model has the following characteristics:

• Liquidity: Publicly traded assets or Tokens have higher liquidity, which means a faster exit path.
• Accessibility: Compared to the high threshold of private equity venture capital, liquidity venture capital allows investors to directly purchase Tokens or participate through over-the-counter trading.
• Position Management: The company issues tokens in advance, allowing small funds to establish meaningful positions, while large funds can also invest in high market cap circulating tokens.
• Fund Operations: High-performing encryption venture capital funds typically allocate reserve assets to mainstream coins, achieving excess returns. It is expected that during bear market cycles, venture capital funds will more frequently call upon funds in advance and invest in quality Tokens.

The encryption sector will continue to lead the innovative frontier of venture capital. The integration of public and private capital markets is a development trend in venture capital, with more traditional venture capital funds choosing to position themselves in the liquidity market or the secondary equity market, while the crypto space has already taken the lead in this regard. As more assets are put on-chain, it is expected that more companies will opt for "on-chain priority" financing methods.

It is worth noting that the return distribution in the encryption market often exhibits a "power law distribution" that is more pronounced than that of traditional venture capital—top encryption assets are not only competing for the status of digital sovereign currency, but also to become the foundational layer of the new financial economy. Despite the more extreme return distribution, it is precisely this potential for asymmetric returns that will continue to attract a large influx of capital into encryption venture capital.