The business of crypto VC is becoming more prosperous

作者：Zhou, ChainCatcher

Many people believe that crypto VC is heading towards 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.

However, what is happening now might be one of the most promising moments since the industry’s inception, as the market is experiencing its first real differentiation.

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

On one side, Dragonfly Capital completed its fourth fundraise, totaling $650 million, focusing on stablecoins, on-chain financial infrastructure, and real asset tokenization.

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

Both are top-tier crypto venture funds, yet they are navigating a low-cycle period in very different ways.

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

These three funds represent three very different answers to the current industry dilemma faced by crypto VCs.

Defense: a16z Crypto’s Long-Term Logic

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

Earlier this year, a16z closed a new round of $15 billion, covering infrastructure, application layers, and growth funds, and listed 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 long-term holdings, because in venture capital, selling high-quality assets too early is the worst decision.

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

Their investors are long-term institutional capital and seasoned believers in the industry’s potential.

For them, as long as they believe in crypto’s future, a16z Crypto is the natural choice.

Evolution: Dragonfly’s Financialization Path

Founded in 2018, Dragonfly started as an early-stage crypto VC connecting Asian and US markets. Its first fund was only $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 market 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 combined judgment and trading capabilities in secondary markets.

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

Dragonfly’s externally recruited roles have explicitly required expertise in delta-neutral hedging and derivatives risk management—rare skills in crypto, requiring long adaptation periods from traditional finance.

This trading system is a barrier accumulated over years, making it difficult for others to replicate directly.

Today, Dragonfly manages about $4 billion in assets, with a portfolio including unicorns like Ethena, Polymarket, and Monad Labs.

Behind this is a less optimistic industry trend.

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

Total funding increased, but the number of projects receiving funding decreased, indicating that capital is becoming more concentrated, leaving less room for small and early-stage projects.

Dragonfly managing partner Haseeb Qureshi believes that the era of broad crypto applications with non-financial attributes has been discredited. 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.

The key to Dragonfly’s approach is to go with the trend—crypto is becoming increasingly financialized, and they are early adopters of turning 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 technologies.

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 collaborator, Stripe founder Patrick Collison, described him as “calm, rigorous, and patient—traits well-suited for complex technologies with influence post-implementation.”

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

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

After the collapse of FTX, 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 the industry’s stagnation.

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. Huang explained that “AI’s progress is too interesting to ignore,” and emphasized that crypto and AI are not zero-sum but will have significant overlap. Earlier this year, Paradigm partnered with OpenAI to release 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 VC investments worldwide, up from only 30% in 2022.

However, on a more pragmatic level, Paradigm’s pivot to AI has structural reasons.

In the entire crypto VC landscape, a16z Crypto dominates with long-term capital, while Dragonfly is the most transaction-oriented player in the financialization track.

Paradigm’s team DNA cannot replicate a16z Crypto’s long-term belief narrative, nor is it suited for Dragonfly’s trading-driven approach.

Its team is only capable of telling stories of integrated innovation, aiming to attract new funds that have already lost interest in pure crypto but are willing to bet on cross-industry technological convergence.

This underlying motivation drives Paradigm’s shift and represents its only misalignment.

Alexander Pack, managing partner at Hack VC (former Dragonfly partner), notes that KKR and Bain Capital have shifted from private equity to credit and public markets, and a16z has funds across various tech segments. Paradigm’s move signals the company’s maturing and re-integration into broader tech fields, aligning with industry trends.

Three Paradigms, Three Bets

Putting these three funds together reveals a clear ideological divergence.

Each answers the same question: during 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 its scope into larger waves of technological convergence.

Three funds, three responses. No single paradigm is the final answer, nor can any be easily copied—what stories they tell ultimately depend on team DNA.

This may be a sign of crypto VC’s maturing: no longer are all rushing down the same path, but each finding its own. Homogeneity makes the industry fragile; diversity allows it to truly thrive.