In April, in addition to the overall volatility of the crypto market, perhaps the most explosive news was that Du Jun, co-founder of ABCDE, announced the official halt of new project investments and suspended the fundraising plan for the second phase fund. He also elaborated on the upcoming pivot in investments: shifting to a new path focused on strategic incubation and secondary market allocation.
In fact, as early as the end of 2024, many articles about crypto venture capital were 'complaining' about a tragic fact: the primary market has become unprofitable. Players no longer buy into VC narratives, leading to over 80% of VCs facing losses. Du Jun also expressed in early March 2025 that the ETH holdings he increased over the past year have seen paper losses exceeding $20 million.
In this context, the action by ABCDE has been rumored in the market as 'bankruptcy.'
However, fundamentally, this phenomenon of VC losses has raised another question: How should new investors choose new participation paths in the face of the unsustainability of crypto VC?
Portal Labs believes this is an issue that every high-net-worth investor should pay attention to. Therefore, Portal Labs first systematically organizes the main investment methods and participation mechanisms in the Web3 industry in this article.
Early-stage Investment
Primary market investment refers to participating in the early financing rounds (pre-seed, seed, private placement, etc.) of Web3 projects through crypto funds, with the fund management team (GP) responsible for project selection and developing investment research strategies. Investors act as limited partners (LP) and enjoy the overall returns of the fund.
This path mainly relies on standardized fund structures (such as Cayman, BVI, Bermuda, etc.), focusing on token (Token) assets, with a small number of funds also engaging in equity allocation.
Capital Demand
The usual minimum investment threshold is above $100,000, with top funds often requiring a $1 million LP minimum investment, suitable for investors with larger asset scales. Funds are typically locked for 3 to 5 years, and cannot be exited at any time; investors must wait for overall fund liquidation or exit windows.
Exit Cycle
Medium to long-term cycles, averaging between 1 to 3 years, depending on the project's token launch and liquidity in the secondary market. Some funds may adopt phased exit mechanisms, but overall flexibility is far less than that of the secondary market. If encountering a bear market, the launch cycle of primary projects can be prolonged, and sometimes 3 years may not guarantee a return.
Strategy Proactivity
Extremely low for LPs, entirely relying on the fund management team's investment research and strategy execution, with investors not participating in specific project selection or post-investment management. The internal proactivity of the fund depends on the team's project screening capabilities, depth of support, and exit rhythm.
Return Model
This is a typical high-risk, high-reward path, relying on entering at low valuations in the early stages to capture Alpha returns after project launch. However, when the cycle enters a bear market and token valuations systematically shrink, the overall return rate of the fund may fluctuate significantly or even drop to zero. Most funds established between 2021 and 2022 are facing pressure to withdraw tokens by over 90% in 2024, with IRR performance generally falling short of expectations.
Compliance Reminder
Most crypto funds adopt offshore structures, such as Cayman or BVI funds, aimed at qualified investors (meeting local net asset or income standards). As global regulation tightens, some countries have clear requirements for fund raising and token asset management; investors must confirm the compliance of the fund's fundraising and custody arrangements to avoid liquidity or legal risks. In certain jurisdictions, especially the US and Europe, fund investors may need to meet specific qualification requirements to avoid legal risks arising from compliance issues.
Typical Cases
Paradigm: Known for crypto infrastructure and DeFi investments, early participant in projects like Uniswap and dYdX.
Multicoin Capital: Focuses on L1 and L2 ecosystem investments, supporting projects like Solana and The Graph.
ABCDE Capital: Previously active in the Asian market, investing in over 30 projects, but recently announced a halt to new investments.
Suitable Demographics
Suitable for high-net-worth investors pursuing early project Alpha who are willing to accept liquidity locks, especially those lacking direct project investment research capabilities and wishing to allocate assets through fund teams. However, they need to have sufficient capacity to withstand cyclical fluctuations and understand the uncertainty of exits in the primary market.
Secondary Market Investment
The secondary market path refers to buying and selling listed tokens, market making, hedging, and arbitrage through public trading markets (such as CEX, DEX, OTC channels, etc.). This is the most flexible and market-driven investment method in the crypto market, usually relying on market volatility and liquidity to generate returns.
High-net-worth investors can participate in secondary market investments through specialized means such as quantitative funds, hedge funds, or strategy products, pursuing more precise market positioning and optimizing risk-return.
Capital Demand
Extremely flexible, accommodating amounts from tens of thousands to millions of dollars; however, to truly excel, mature strategies and risk control systems are required, or support from professional teams/products.
Exit Cycle
Assets can be traded and adjusted at any time, providing complete liquidity; however, volatility is extremely high, and market conditions change rapidly, requiring close attention to market trends and risk management.
Strategy Proactivity
Extremely high, investors need to actively build strategy combinations (such as spot allocation, futures hedging, arbitrage, event-driven, etc.) and continually adjust based on market dynamics. They can also reduce the intensity of active management through structured products or custody platforms (such as strategy combination packages, yield enhancement products).
Return Model
Returns mainly come from volatility arbitrage, market trend capture, and short-term event-driven strategies. Compared to traditional markets, the secondary market's volatility is significant, so the return model can be substantially higher than that of traditional stock markets. High-net-worth investors can achieve higher returns through quantitative hedging, algorithmic trading, and other professional strategies amid market fluctuations while reducing systemic risks. It is important to note that the returns in the secondary market have high volatility, especially during periods of extreme market sentiment fluctuation, where returns may be greatly affected.
Compliance Reminder
High-net-worth investors participating in the secondary market must use compliant trading platforms (such as CEX, DEX) to ensure that the platforms meet the regulatory requirements of their respective countries or regions. Due to some countries taxing secondary market returns (such as capital gains tax), cross-border traders need to pay attention to tax compliance and choose appropriate structures to reduce tax burdens. The use of custody platforms and quantitative funds also requires attention to custody safety and fund compliance to ensure the liquidity and safety of funds.
Typical Cases
Amber Group: Provides diverse strategy services such as secondary trading, market making, and arbitrage, targeting institutional and high-net-worth clients.
Wintermute: A global leading crypto market maker, active in the secondary liquidity capture field.
QCP Capital: Focuses on options, volatility arbitrage strategies, suitable for hedging and yield enhancement configurations.
Du Jun's Personal Account: Du Jun plans to release a buying list in May to showcase his secondary market allocation path, reflecting his focus on the shift towards liquid assets.
Suitable Demographics
Investors such as quantitative fund and hedge fund managers who have strategy design and market monitoring capabilities; high-net-worth individual investors, especially those looking to flexibly manage asset liquidity and avoid systemic risks; for investors without trading experience, they can indirectly participate in the secondary market through quantitative strategy products, asset management platforms, or custody accounts to enjoy the benefits and risk optimization brought by professional management.
Incubation Investment
Incubation-type investments differ from traditional VC financial investments in that they emphasize a combination of strategic collaboration and capital injection. Investors not only provide funds but also deeply participate in key aspects such as product design, market strategy, and resource integration, helping projects grow from 0 to 1.
Incubation-type investment models are typically seen in platform-type institutions (such as exchanges, infrastructure providers) or industrial capital, exchanging resources and capabilities for significant early-stage tokens or equity shares, magnifying their ecological value through strategic synergy.
Capital Demand
Compared to the million-dollar minimum for fund-type investments, the capital demand for incubation-type investments is relatively flexible, ranging from tens of thousands to millions. Incubation-type investments not only require capital input but also need to provide non-capital resources (such as traffic, products, markets, talents, etc.).
Exit Cycle
Medium-term cycles, generally ranging from 6 months to 2 years, depending on the project's launch, financing rhythm, and ecological advancement speed. Incubators typically exit in phases through the large proportion of tokens or equity acquired in the early stages as the project matures and the ecosystem progresses. This exit method often requires patience while waiting for the project to gradually grow and gain market acceptance.
Strategy Proactivity
Extremely high. The core of incubation investment lies in active intervention and deep collaboration, where investors or institutions often directly influence project direction, product rhythm, and even participate in key aspects such as operations and marketing. The relationship with the project is one of co-construction, not merely financial investment.
Return Model
The returns from incubation-type investments mainly come from the large proportion of tokens or equity obtained in the early stages. If the project is successful, investors can typically achieve returns of several times their investment. However, such returns also come with high execution risks. The success of the project depends not only on market acceptance but also on the close collaboration between investors and the project team. If the project fails, the investment may be worth nothing, which is a typical characteristic of high-beta models in incubation investments.
Compliance Reminder
The compliance of incubation investment mainly involves issues such as the location of token issuance and equity structure design. Investors need to pay particular attention to whether the project team meets the regulatory requirements of their region, such as securities laws and token issuance compliance. If investors provide non-capital resources such as market, users, and products in addition to funds, it may involve related party transactions, interest disclosure, and other compliance issues; thus, it is essential to clarify the rights and responsibilities of all parties and compliance obligations when signing agreements.
Typical Cases
Binance Labs: A global leading crypto incubation platform, known for incubating projects like Polygon and Injective, providing comprehensive services such as funding, resources, and exchange support.
Alliance DAO: An incubation platform for entrepreneurs in the Web3 field, emphasizing deep collaboration between the community and founders.
Vernal: After Du Jun closed ABCDE, he turned to the incubation path, emphasizing companionship, strategic investment, and ecological synergy, with the first batch of projects and buying lists to be announced in May.
Suitable Demographics
Investors with industrial resources, product capabilities, and market channels who are willing to invest time and energy in project incubation, pursuing long-term synergies as high-net-worth investors. At the same time, it is suitable for investors with entrepreneurial backgrounds who understand the project lifecycle, can bear the risk of project incubation failure, and are willing to provide support and guidance during the project's growth process.
Structured Investment Path
The structured investment path refers to the combination allocation, strategy execution, and risk management of crypto assets through professional asset management platforms, custodians, or fund structures. Investors do not need to personally participate in specific project selection or daily trading but rely on professional investment teams and tools to achieve asset appreciation through one-stop allocation services.
This path is common in crypto asset funds, funds of funds (FOF), and portfolio strategy accounts, where investors' funds are diversified according to preset risk preferences and investment goals.
Capital Demand
Medium to high capital demand, with a typical minimum investment threshold ranging from $50,000 to $500,000, varying according to the product design's complexity and strategic depth. Through custody platforms or asset management platforms, investors can choose different strategy combinations within the funding threshold to achieve personalized investment goals.
Exit Cycle
Short to medium-term. Unlike the long-term lock-up in the primary market, most structured investment products have flexible exit cycles, allowing investors to choose regular adjustment windows (such as monthly or quarterly) based on product design and make timely adjustments. However, some structured products still have minimum holding periods, and compared to the complete liquidity of the secondary market, exit cycles remain limited. For high-net-worth investors, this path allows for flexible adjustments to investment portfolios, but attention must be paid to the relationship between flexibility and return volatility.
Strategy Proactivity
Medium to Low. The structured investment path relies on a professional management team to execute strategies, and investors do not need to participate in specific project selection or daily trading. High-net-worth investors make investment decisions by choosing suitable investment platforms or funds based on their professional research capabilities and market judgment. This path does not require excessive operational involvement from investors but allows them to adjust investment directions based on their risk preferences.
Return Model
Returns mainly come from diversified strategy allocation. Structured investments aim to achieve stable returns by optimizing risk allocation and improving capital liquidity by spreading funds across different projects, asset classes, or markets. The return model is usually relatively robust, suitable for long-term asset allocation. Compared to the high volatility of secondary markets, structured products focus more on risk management and portfolio optimization, balancing returns and risks through diversified investments and yield enhancement strategies. However, this robust return model also comes with lower yield elasticity.
Compliance Reminder
Most structured investment paths involve compliance custody, especially for products aimed at qualified investors. Investors need to ensure the selected platform or fund complies with local regulatory requirements to avoid legal risks due to non-compliance. For cross-border investors, cross-border tax compliance is also a special focus, especially regarding capital gains tax, VAT, and other related regulations. Investors must also ensure that the selected products meet KYC/AML (Know Your Customer/Anti-Money Laundering) requirements.
Typical Cases
Matrixport: Offers diversified strategy combinations, including DeFi yield enhancement, RWA bonds, option structured products, etc., providing personalized asset allocation services for high-net-worth investors.
HashKey Capital: Leveraging compliance advantages in Hong Kong, provides strategy combinations and custody services, dedicated to helping institutions and high-net-worth clients diversify their investments.
Anchorage Digital: As a global leading compliance custody platform, Anchorage provides structured products to assist institutional clients in crypto asset allocation and risk management.
Fidelity Digital Assets: Through its institutional custody services, offers diversified asset management and investment strategies, including strategy combinations and hedge funds.
Suitable Demographics
Suitable for high-net-worth investors who hope to entrust professional teams to manage assets, optimize risk-return, focus on compliance, and long-term returns; or those who wish to diversify investment risks and achieve stable appreciation through strategy combinations, especially for those who lack direct research capabilities or do not wish to invest a lot of time and energy in investment decisions.
Beyond the Path, There Are Trends
In this article, we detailed the four main paths of Web3 investment, each with its unique mechanisms, target demographics, and risk characteristics.
Portal Labs emphasizes that there is no absolute superiority or inferiority in investment paths; the key lies in whether it matches your resource structure, risk preferences, expected goals, and operational compliance.
However, beyond the path, the market itself is undergoing profound structural changes. With the decline of the VC model, the revival of incubation models, and the accelerated evolution of secondary market strategies, the Web3 investment ecosystem is developing towards a more flexible and diversified direction. This series of changes reflects the continuous adaptation and adjustment of the market and capital, also pushing the entire industry towards a more mature and rational development stage.
In the upcoming articles, Portal Labs will continue to delve into the industry trends and cyclical logic behind this round of 'path evolution,' starting from Du Jun's strategic adjustments.
*Reminder: Investing involves risks; please participate in Web3 under legal and compliant conditions.