The business of crypto VC is becoming more prosperous

Author: Zhou, ChainCatcher

Many believe that crypto VC is heading into its twilight.

Over the past decade, crypto VC has been highly homogeneous—clustering in the same sectors, telling the same stories, competing for the same projects. It may seem lively, but internally, the industry is fragile.

But what is happening now might be one of the most promising moments since the industry’s inception—the market is finally showing real differentiation.

By the end of February 2026, two fundraising announcements emerged in succession.

One is Dragonfly Capital completing its fourth fundraise, totaling $650 million, focusing on stablecoins, on-chain financial infrastructure, and real asset tokenization.

The other is Paradigm seeking up to $1.5 billion for a new fund, expanding its investment scope from crypto to frontier technologies like AI and robotics.

Both are top-tier crypto VCs, yet in the same downturn cycle, why have they taken such different paths?

If we include a16z Crypto in the picture, the question becomes even more intriguing.

These three funds represent three very different responses to the current industry challenges faced by crypto VC.

Conserve: a16z Crypto’s Long-Term Logic

In the fundraising landscape of crypto VC, a16z Crypto has long held a top-tier position. It is a dedicated crypto investment fund under Andreessen Horowitz (a16z), which has raised four funds since 2013, totaling over $7.6 billion, making it one of the largest crypto funds globally.

Earlier this year, a16z completed a new round of fundraising totaling $15 billion, spanning infrastructure, application layers, and growth funds, with a focus on the intersection of AI and crypto as a key investment area.

a16z Crypto partner Chris Dixon views blockchain as the next infrastructure of the internet, believing the crypto industry is in a long “building phase,” similar to how neural network papers in 1943 laid the groundwork for today’s AI. Mainstream adoption requires decades of preparation.

Dixon has publicly stated that 95% of the assets held by a16z Crypto are from investments made early on, because in venture capital, selling high-quality assets too early is the worst decision.

Their annual crypto industry report signals to investors: even in downturns, they are still diligently understanding what’s happening in the industry.

The investors they target are long-term institutional capital, believers in the industry’s potential.

For them, as long as they believe crypto has a future, a16z Crypto is the natural choice.

Transform: Dragonfly’s Financial Evolution

Founded in 2018, Dragonfly started as an early-stage crypto VC connecting Asian and US markets. Its first fund was just $100 million, with its core advantage being the geographic arbitrage of co-founders operating across China and the US.

Since 2019, Dragonfly has gradually expanded into the secondary market, managing liquidity funds and building its own trading team. This not only serves as a risk hedging tool but also provides real-time market data for primary investments, aiding project evaluation.

In 2022, Dragonfly acquired Metastable, a crypto hedge fund co-founded by Naval Ravikant in 2014, integrating it into its operations. This created three parallel business lines: Dragonfly Ventures (primary investments), Dragonfly Liquid (liquidity strategies), and Metastable (hedge fund).

The core difference between Dragonfly and pure primary crypto funds lies in their judgment and trading capabilities—combining primary deal flow with secondary market trading.

Building this system was not overnight. Establishing an investment framework spanning primary and secondary markets requires developing two completely different decision-making, risk management, and talent structures—deep technical judgment for early-stage projects, and precise quantitative skills for market microstructure in secondary trading.

Dragonfly’s external job postings explicitly require skills in delta-neutral hedging, derivatives inventory risk management, and related areas—talents that are scarce in crypto and require long adaptation periods from traditional finance.

This trading system is a barrier accumulated over years, and one of the hardest to replicate.

Today, Dragonfly is a trading-driven institution operating across primary and secondary markets, managing about $4 billion in assets, with a portfolio including unicorns like Ethena, Polymarket, and Monad Labs.

However, behind this success lies a less optimistic industry trend.

According to RootData, in 2025, the crypto primary market raised $22.73 billion (excluding post-IPO and debt financing), a 120.6% increase from 2024; but the number of funding events was only 933, down 40.3% from last year—hitting a five-year low, with monthly funding events trending downward.

Total funding amount is rising, but the number of projects receiving funding is decreasing, meaning capital is becoming more concentrated, leaving less room for small and early-stage projects.

Dragonfly managing partner Haseeb Qureshi believes that the previous broad crypto and non-financial application experiments have been disproven by the market. The new fund will focus on stablecoins, DeFi, and on-chain financial services.

He pointed out that recent investments in Ethena, Polymarket, Rain, and Mesh demonstrate this shift: “Crypto’s coverage is about to explode, and we want to support founders at the center.”

Their investors are those who believe in the financialization of blockchain, are transaction-driven allocators, and have a pragmatic attitude toward crypto.

They may not need a grand narrative about crypto changing the world; real liquidity and sustainable trading returns are what they seek.

Dragonfly’s path is about riding the trend—crypto is becoming increasingly financialized, and they are early to turn this trend into their core competitive advantage.

Breakthrough: Paradigm’s Boundary Narrative

Paradigm’s story begins with a set of numbers.

In 2021, Paradigm raised $2.5 billion, setting a record for the largest single crypto fund at the time.

By 2024, its third fund shrank to $850 million.

Now, it aims for $1.5 billion, expanding its scope from crypto to AI, robotics, and other frontier tech.

Paradigm’s foundation is VC incubation. Co-founder Matt Huang comes from Sequoia Capital, having founded a machine learning startup at 19 that was acquired by Twitter; co-founder Fred Ehrsam was a Coinbase co-founder.

Their strength lies in early trend judgment and technical risk control. Matt Huang’s colleague, Stripe founder Patrick Collison, described him as “calm, rigorous, patient—traits well-suited for complex technologies with influence later.”

Paradigm’s portfolio includes early protocols like Uniswap and Coinbase, which established its industry position.

As a result, Paradigm is often described as “more like a research lab combined with an engineering organization than a traditional VC.”

After FTX’s collapse, Paradigm took three years to rebuild. But the shortage of quality early-stage projects remains a fundamental problem—without good projects, even a strong reputation cannot prevent difficulties.

Thus, Paradigm’s shift toward AI is not a sudden whim.

In fact, as early as 2023, Paradigm quietly removed references to Web3 from its website. Matt Huang explained that “AI’s progress is too interesting to ignore,” and that crypto and AI are not zero-sum but overlapping. Earlier this year, Paradigm and OpenAI jointly released EVMbench, a benchmark tool to test whether AI models can identify and fix smart contract vulnerabilities.

According to OECD data, in 2025, global VC investment in AI will reach $258.7 billion, accounting for 61% of total global VC funding, up from only 30% in 2022.

On a more pragmatic level, Paradigm’s move into AI has structural reasons.

In the entire crypto VC fundraising landscape, a16z Crypto dominates with long-term capital, Dragonfly is the most transaction-capable player in financialization, and Paradigm’s team is built for early trend judgment and technical risk management. Their shift reflects the industry’s broader evolution—moving toward maturity and re-engagement with wider tech fields.

Three Paradigms, Three Bets

Putting these three funds side by side reveals a clear ideological divergence.

Each answers the same question: in a crypto downturn, why does your fund still exist?

a16z Crypto’s answer is scale and faith—big enough to survive cycles, deep enough to represent the industry, continuously conveying confidence to the market.

Dragonfly’s answer is capability and focus—deeply engaged in crypto financialization, leveraging trading skills to compensate for primary market limitations, maintaining active capital during scarce project periods.

Paradigm’s answer is narrative and boundary-breaking—using AI and crypto’s fusion to attract investors beyond traditional crypto VCs, expanding from a single industry into a broader wave of technological integration.

These three responses are neither final nor interchangeable—what story they tell ultimately depends on team DNA.

This may be a sign of crypto VC’s maturing: no longer a herd rushing down the same path, but each finding its own way. Homogeneity makes the industry fragile; diversity allows it to grow and evolve.