Original Author: Mason Nystrom (@masonnystrom)

Compilation | Odaily Planet Daily (@OdailyChina)

Translator | Ethan (@ethanzhangweb3)_

Editor's Note: As we enter 2025, the primary market financing environment continues to face pressure, with insufficient LP returns and tight VC dry powder (Note: dry powder refers to cash reserves or highly liquid assets held by companies or venture capital funds) becoming structural challenges. However, at the same time, there are signs of a warming in Pre-seed financing, increased M&A activity, and sustained early project activity, all pointing quietly towards the reconstruction logic of the next crypto venture capital cycle.

The author of this article, Mason Nystrom, has long focused on the evolution of crypto capital structures and financing data trends. The article addresses some key issues in this field: Why does the current market seem sluggish but total financing remains stable? Why is the VC structure shifting from "equity + tokens" to "token-first"? How will the new round of competition unfold between Fintech VCs and Crypto VCs? What capital operation model is implied behind Liquid Venture?

In the face of the new cycle's arrival, these fundamental and critical questions deserve to be recognized earlier. Below is the original content by Mason Nystrom, compiled by Odaily Planet Daily.

Opening: The Current Environment is Challenging

The difficulty in fundraising stems from challenges at both the upstream DPI and LP capital levels.

Looking at the entire venture capital market, the amount of funds returned to LPs by various funds over the same time period is less than in previous rounds. This, in turn, leads to a reduction in available funds for both existing and emerging VCs, ultimately making the fundraising environment more difficult for entrepreneurs.

What does this mean for Crypto VCs?

Slower Transactions in 2025, but Funding Pace Remains on Par with 2024

• The number of investments has decreased, possibly due to many VC funds nearing their end, resulting in reduced available funds;

• Some large funds are still driving large transactions, so overall funding remains on par with the past two years.

M&A Activity in the Crypto Industry has Continued to Improve Over the Past Two Years, Benefiting Liquidity and Exit Opportunities

Over the past two years, M&A activity in the crypto space has continued to warm up, bringing positive signals for market liquidity and exit opportunities.

Recent large M&A cases, including NinjaTrader, Privy, Bridge, Deribit, and HiddenRoad, show an accelerated trend of industry consolidation, providing valuation support and a foundation for more crypto equity projects to exit.

Trends Behind Changes in Financing Structure

Stable Transaction Numbers, but Concentrated in Early Stages

Over the past year, the number of transactions in the crypto industry has remained relatively stable, with some larger late-stage financing rounds completed (or announced) in Q4 2024 and Q1 2025.

This phenomenon largely stems from a concentration of transactions in Pre-Seed, Seed, and accelerator stages, which typically have more available capital.

Accelerators and Launchpads Become Main Forces (From the Perspective of Financing Stages)

Since 2024, a large number of accelerators and launchpads have emerged in the market, a trend that may reflect tightening capital conditions and founders' preference for early token issuance to launch projects more flexibly.

Median Size of Early Financing Rounds is Rising

The amount of financing in the Pre-seed stage has continued to grow year-on-year, indicating that there is still ample capital support in the earliest stages of the market;

The median financing amounts for Seed, Series A, and Series B rounds have approached or returned to 2022 levels.

Three Major Predictions for the Future of Crypto VCs

Prediction 1: Tokens Will Become the Primary Investment Vehicle

The market is gradually shifting from a dual structure of "tokens + equity" to a single asset structure, where a single asset carries both the project's value and the logic of investment returns.

One asset, one value accumulation narrative.

Prediction 2: Accelerated Integration of Fintech VCs and Crypto VCs

Almost all Fintech investors are transitioning to become crypto investors. They are laying out next-generation payment networks, new digital banks, and asset tokenization platforms—these systems all operate on crypto infrastructure.

Competition is closing in on crypto VCs—those crypto funds that have yet to venture into stablecoins, on-chain payments, and other areas will struggle to compete with experienced Fintech investors.

Prediction 3: The Rise of "Liquid Venture"

"Liquid Venture" refers to a new form of gaining venture-like opportunities in the liquid token market.

• Liquidity: The high liquidity of public assets/tokens means faster exit paths;

• Accessibility: Traditional private equity VC has high participation thresholds, while Liquid Venture allows investors to buy target tokens directly in the market without "snapping up quotas," and also participate through OTC;

• Position Management: As projects issue tokens at earlier stages, small funds can also establish meaningful investment positions, while large funds can deploy in high market cap tokens;

• Treasury Allocation: Many historically high-performing VC funds have long allocated their treasuries to tokens like BTC and ETH, thus achieving excess returns. In my personal judgment, in the upcoming bear market cycle, this practice of drawing capital early and allocating mainstream tokens will become the industry norm.

Crypto VCs: The Vanguard of Venture Capital

Venture capital is moving towards the integration of public and private capital markets, with more traditional venture capital funds choosing to participate in liquidity markets (such as post-IPO holding tools) or secondary market investments, as companies generally delay going public. Crypto is at the forefront of this transformation.

The crypto industry continues to drive innovation in capital market structures. As more assets go on-chain, companies will also be more inclined to prioritize on-chain capital raising methods.

Finally, the outcomes of crypto projects often exhibit a more pronounced power-law distribution than traditional venture capital. Leading crypto assets are competing to become the underlying infrastructure for sovereign-level digital currencies or new financial systems. The variance in these outcomes will be greater, but it is precisely the extreme power-law effects and high volatility of the crypto market that continue to attract capital chasing asymmetric returns.

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