Organizer: Scof, ChainCatcher

Editor: TB, ChainCatcher

Crypto VC is at a significant crossroads. As liquidity in the primary market shrinks and exit difficulties increase, the once-glorious star funds ABCDE have chosen to hit the pause button, a move that has become a trigger for deep industry tremors.

This issue of Space invited five guests: Du Jun, founder of Vernal & Huobi, KK, founder of Hash Global, Will Wang, partner at Generative Ventures, Jademont, CEO of Waterdrip Capital, and Henry, investment director at NGC Ventures, to delve into the pause of ABCDE, exploring the current challenges in the primary market, the structural dilemmas faced by crypto VC, and the changes in investment logic and survival strategies at this new cycle node.

In the current context of diminishing liquidity dividends and narrative fatigue, how can crypto VC redefine value? Can primary investments continue? Where are the new exit channels? What core capabilities are necessary to navigate the winter and win the future? We attempt to find answers through a calm examination of reality.

For the full version, click to listen to the replay: https://x.com/i/spaces/1MnxnwXVYeyKO

The following content is a summary of the main points and core thoughts based on the Space discussion, not a complete verbatim record, aiming to present the essence and context of this in-depth dialogue.

1. Is the pause of ABCDE a case or an industry trend? What dilemmas does it reveal that crypto VC currently faces?

In discussing the phenomenon of ABCDE's pause, everyone unanimously agreed that this is not an isolated case but a reflection of a common trend in the crypto VC industry.

Will pointed out that as the influence of exchanges gradually weakens, the model that once relied on exchange listings to guarantee liquidity and exit returns has faced significant challenges. Issues such as the decline of the shell effect, revaluation in the secondary market, high valuations in the primary market, and long lock-up periods have concentrated to create difficulties for crypto VC in exiting and increased uncertainty about project futures. At the same time, liquidity premiums no longer easily support asset pricing, forcing investors to reassess the fundamentals of projects and emphasize the importance of truly creating value. The industry is gradually shifting from the previous rough growth of quickly issuing tokens for arbitrage to patiently incubating and supporting real businesses, returning to an investment logic that can genuinely create long-term value.

Jademont analyzed the issue of structural imbalance in the industry at a deeper level. He pointed out that the exchanges have long held excessive influence in the crypto space, which is completely different from traditional capital markets. In the stock market, exchanges are merely neutral platforms that provide trading services and charge fees, but in the crypto space, exchanges engage in trading, investment, lending, and even directly intervene in the release of project tokens. This centralized and unregulated situation renders investment agreements virtually meaningless. He bluntly stated that the current dilemma of VC investment is not just a problem with the projects themselves, but rather a result of the chaotic ecological rules and the extremely weak position of investors. He mentioned that several recently launched projects had originally agreed to issue tokens but suddenly changed their minds, arbitrarily stripping investors of their rights, leaving them helpless. This phenomenon severely undermines the basic trust in the primary investment market. However, Jademont also saw a glimmer of positive change. He believes that as more projects have market capitalizations of only one or two hundred million dollars even after listing, the industry is beginning to realize that exchanges are no longer the sole standard for a project's success or failure. When the gap between "listing" and "not listing" narrows, the VC industry is also expected to return to a more normal investment logic.

Henry added that the excessive influence of exchanges in the crypto industry has long marginalized the decision-making power and influence of VCs in projects. Even as lock-up periods grow longer, VCs have increasingly less actual control over projects. As the liquidity premium effect post-listing gradually weakens, the market capitalization differences between projects on different exchanges are also narrowing, and the absolute position of exchanges is slowly being shaken. He stated that although the current primary market investment faces difficulties, these difficulties are cyclical. With industry reshuffling and a return to original intentions, the investment rhythm and industry influence are expected to gradually recover.

2. Is primary investment still effective in the crypto market? What is the most "difficult" point in the primary market now?

Du Jun believes that primary investment in the crypto market is still effective, but the difficulty has significantly increased. The current challenges in the primary market mainly manifest in several aspects: first, project valuations remain high, while the uncertainty of investment exits has greatly increased; second, competition for good projects is exceptionally fierce, making it difficult to secure shares, and long-term lock-up periods further amplify future risks. He also expressed that he is not very interested in recent token issuance projects and prefers to seek resilient projects that can cross cycles.

KK believes that investors must pay more attention to the fundamental value of projects rather than short-term liquidity arbitrage opportunities. He prefers to invest in commercial infrastructure, such as stablecoins, payments, and commercial data chains. Additionally, due to the low adoption rate of Web3 applications, primary market projects also face significant challenges in landing and user growth. Especially for early-stage projects, where business models are not yet clear and market validation cycles are long, the investment return cycle is extended. Primary investors need to be more patient and select those projects that have the potential to cross cycles and truly create user and commercial value.

3. In which direction will future crypto primary investment develop?

Regarding the future direction of primary investment, Will stated that although the primary market environment is challenging, those who have been doing primary investment for over a decade are already accustomed to such fluctuations. The current issue in the crypto market is that the industry governance structure is primitive, exchanges hold excessive influence, and founders lack true risk-bearing, leading to the disappearance of excess returns. He pointed out that future primary investments must bet on founders and projects that genuinely take risks. Only those willing to invest time, reputation, and bear significant failure risks can create real value and returns in the industry. The market is becoming effective: junk projects are being discarded, and exchanges that do not reform will also be eliminated. The opportunity for VCs lies in firmly supporting those founding teams that can cross cycles and dare to take risks.

Additionally, KK emphasized that the core direction for the future is to promote the commercialization of Web3. VCs need to find companies that have performed well in Web2 and help them solve cost reduction and efficiency improvement issues through Web3 technology. For example, in the film, music, and sports sectors, they should persuade them to transform with concrete commercial value rather than merely talking about the Web3 vision.

Henry believes that future crypto primary investment will revolve around the layout of "leading a version." Although the market is difficult, sticking to primary investment remains the main line for crypto-native funds, but it will be more cautious and moderately diversified, such as allocating a small amount of secondary market assets, without forcibly transforming into areas they are not good at. He shared an investment case: at the beginning of the last cycle, he backed a project that timely transformed. The founder not only had advanced cognition but also dared to decisively bet when the trend was not yet clear, ultimately becoming a pioneer in the track and achieving impressive returns. Henry believes that in the future, selecting projects will hinge on the founder's cognitive ability and risk-taking. Additionally, he emphasized that cross-cycle operational capability is equally important. Projects must be able to maintain direction during bear markets and adjust flexibly to gain an advantage when bull markets erupt. Future primary investments will not only compete on short-term returns but also on whether the team can cross cycles and seize the next explosive point.

Jademont pointed out that for crypto VCs to break through their dilemmas in the future, they must actively evolve and cannot continue to be led by the influence of exchanges. He mentioned that although VCs have heavily relied on centralized exchanges for project exits in recent years, with the diminishing liquidity dividends of exchanges and the low market capitalizations of quality projects post-listing, this old path is becoming increasingly difficult to sustain. He shared two exploratory paths for VCs to bypass exchange control: one is decentralized liquidity, such as DEX and decentralized protocols, but this path faces suppression from centralized platforms and is difficult to completely overturn; the second is a more realistic approach—guiding quality projects to traditional capital markets, such as listing on NASDAQ, Hong Kong stocks, and other mature markets. Jademont pointed out that as the U.S. attitude towards the crypto industry improves, more large Web3 companies are preparing to go public, and the liquidity and valuation systems of traditional markets have become better exit channels.

He bluntly stated that rather than fighting in a crypto space filled with Shitcoins, it is better to help truly excellent projects stand out in deeper and broader capital pools. In the future, crypto VCs need to "vote with their feet," using their strength to help projects jump out of traditional listing paths and enter the traditional financial system, achieving higher quality exits and returns. This is not only a test of VC capabilities but also an inevitable trend for the healthy development of the industry.

4. Compared to two years ago, what core indicators do crypto VCs focus on when judging projects? Why?

Will stated that VCs have begun to pursue the Goodwill Finance indicator, which measures a project's real contribution to society and the industry and its actual use cases. The cognitive ability of the project team, reasonable "risk-taking," and the ability to survive and develop across cycles have also become key evaluation points. This change is due to the industry's painful transformation from blindly chasing liquidity to returning to fundamentals, as VCs realize that only projects that truly create value and can cross cycles are worthy of long-term companionship and investment.

KK indicated that compared to two years ago, the core indicators for crypto VCs in judging projects have fundamentally changed. In the past, VCs focused on easily quantifiable indicators such as the number of on-chain addresses and TVL (Total Value Locked), but now they pay more attention to whether the project's business logic is sound, whether it truly solves a clear problem, and whether there is a sustainable revenue and growth path.

Du Jun believes that today's crypto investment must return to the most basic value judgment: whether the project truly creates value. Whether it is public value, commercial value, or other forms of social value, the core is whether it truly solves a problem, rather than playing with concepts or speculating on short-term liquidity. He mentioned that when screening Web3 projects, he often asks two questions: Does the project really need blockchain technology? Is it really necessary to issue tokens? Many projects could actually be more efficient without blockchain and would be cleaner without issuing tokens. This value judgment aligns with the logic used in traditional Web2 investments. In Du Jun's view, future investments should no longer be swayed by hollow narratives but must return to a clear and direct value creation logic. Only truly valuable projects can cross cycles; those without value will ultimately end up in the garbage heap.

5. Would you invest in early crypto funds now? What kind of "survival plan" or "risk hedging" do you hope VCs will provide?

Regarding whether to invest in early crypto funds, the guests generally held a relatively positive but cautious attitude. KK believes that now is the best time to invest in crypto VCs because the industry is undergoing a baptism of value return, with reduced bubbles, rational valuations, and extremely high cost-effectiveness. At the same time, the VCs that are still persevering often have a firm belief in the industry, mature methodologies, and the ability to endure through cycles.

Jademont emphasized that while he is willing to invest, he will be more stringent in selecting GPs (General Partners), focusing on their past performance, strategy execution ability, and capacity to navigate through cycles. As for the "survival plan" he hopes VCs will provide, it mainly includes: reasonable capital management, robust project selection logic, clear exit strategies, and profound insights into industry trends. Truly excellent VCs should be able to survive in the troughs of the cycle and rise rapidly when the cycle reverses.

Will stated that he remains firmly supportive of early-stage VCs in the crypto space, especially those GPs who have endured through the current harsh cycle, as they are mostly individuals with genuine belief, methodology, and the ability to persevere. He believes that now is a period for positive selection of GPs; funds that can persist, adhere to their strategies, and survive on investment returns rather than management fees are the ones worth trusting. At the same time, Will emphasized that trading is the true ace in the crypto industry. Instead of being obsessed with ideological narratives, the industry should focus on expanding on-chain trading volumes to replace a portion of the traditional financial system. The scale effects brought by trading represent opportunities worth trillions or even tens of trillions of dollars in the future. He stated that the impact of crypto trading on traditional finance should not be underestimated, as the industry is currently in a critical battle phase. His fundamental judgment for the future of crypto VC is to persist in betting on trading directions and to support teams that can truly deliver results.

Henry expressed a cautious attitude towards investing in early-stage crypto funds, with stricter selection criteria. Although he has not made any definitive investment decisions yet, he would still consider investing if he sees truly unique competitive advantage in a VC team in the future. He emphasized that regardless of market fluctuations, choosing GPs with differentiated capabilities and long-term competitiveness is key.

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