Although the prices of Bitcoin and altcoins are rising sharply, the venture capital (VC) crypto market is undergoing a harsh cleansing phase. Capital flows from institutional investors (Limited Partner - LP) are absent, creating a "capital desert" right in the middle of the growth cycle.
The shock of trust and capital contraction
After a series of major collapses in 2022 such as FTX, Terra, and Celsius, the trust of investors has been severely eroded. They have become more cautious, turning to stable traditional investment channels instead of risking capital in opaque crypto funds. According to PitchBook, the total capital raised for crypto funds last year only reached 6.7 billion USD, down more than 70% from the peak in 2021.
This capital shortage is eliminating small, inexperienced funds, while capital flows mainly seek large and reputable funds. This makes the crypto startup market difficult, with few quality projects and potential projects being overvalued.
Solutions and Prospects
In this context, new strategies such as Digital Asset Treasury (DAT)—where publicly traded companies buy Bitcoin and crypto as treasury assets—are emerging as an alternative solution. This creates a significant and legitimate demand, helping to connect traditional capital with the crypto market. However, this model also carries risks of vested interests and excessive dependence on corporate funds.
Despite facing many challenges, the market is entering a more mature phase. The collaboration between leading funds and traditional financial institutions, along with the development of AI combined with blockchain and real-world asset tokenization (RWA), shows bright spots for the future. The crypto VC market is undergoing a necessary "cleansing" to become more transparent and sustainable.