Author: Claude, Deep Tide TechFlow

Deep Tide Intro: If you still consider crypto VC as just money for buying coins, Paradigm's new $1.2 billion fund will make you rethink your calculations. This institution, managing nearly $12 billion and one of the most powerful in the crypto space, has clearly allocated funds for AI, robotics, and crypto in its fourth fund, with the backdrop being that of the $510 billion in global venture capital in the first half of the year, only $10.8 billion went to crypto. Old money is voting with its feet; the question is whether it still values pure crypto projects.

On July 8, crypto VC giant Paradigm announced the completion of its fourth fundraise, amounting to $1.2 billion, directed from crypto to AI, robotics, and other cutting-edge technologies. This is the company's fourth fund since its establishment and the third venture capital fund.

Managing partner Alana Palmedo wrote on X platform that this $1.2 billion will be invested in "steep exponential growth." The supporters from eight years ago believed in the crypto frontier; now they are doubling down on "the colliding frontiers" of AI, crypto, space, deep tech, and energy. Co-founder Matt Huang was quoted in a Bloomberg interview stating that crypto was their first frontier, and it remains exciting, but there are too many issues that cannot be ignored at this time.

For the crypto industry, this is not a tactical adjustment by a small institution. Paradigm, founded by Huang (former Sequoia partner) and Coinbase co-founder Fred Ehrsam in 2018, is one of the largest VCs in the crypto sector, managing nearly $12 billion in assets by the end of 2025. The fact that an institution with "crypto native" written on its sign is publicly diverting half of its ammo to invest in AI and robotics is a signal in itself.

$1.2 Billion Below Expectations, Halved from the Previous Crypto Fund

The figure of $1.2 billion becomes interesting when viewed in the context of Paradigm's own fundraising history.

The company previously raised a $2.5 billion crypto fund in 2021, followed by an $850 million early blockchain fund in 2024. This $1.2 billion represents a decline of over half compared to the 2021 fund. It is even more noteworthy that, according to a February report by The Wall Street Journal, Paradigm initially planned to raise up to $1.5 billion for this new fund, but ultimately landed at $1.2 billion, about $300 million below its target.

While the fundraising fell short of expectations, the direction has widened. With less money, there are more tracks to invest in, pointing to the same issue: the single lane of crypto can no longer accommodate the amount of money top institutions want to invest.

For holders of crypto assets or those concerned with the primary market, the operation here means that the total supply of crypto bullets among top VCs is shrinking, and early pure crypto projects may face a more selective and dispersed funding pool in the future.

$510 Billion in Venture Capital in the First Half of the Year, Crypto Only Received $10.8 Billion

The true reason behind Paradigm's turn can be found in the cash flow of the entire industry.

According to data from Crunchbase on July 2, the total global venture capital investment in the first half of 2026 reached $510 billion, setting a half-year investment record, surpassing last year's total of $440 billion. A significant portion of this funding was taken by AI, with just OpenAI and Anthropic accounting for over 40% of the financing amount in the first half. (Disclosure: Anthropic is the developer of Deep Tide's content tool Claude; this data comes from public reports, not provided by Anthropic.)

Meanwhile, the status of crypto stands in stark contrast. According to Cryptorank data, venture capital inflow into crypto in the first half of the year was only $10.8 billion, less than 2.5% of the global total. On one side, AI financing is booming; on the other side, crypto investments are cooling down, which is the direct background for Paradigm's decision to broaden its domain.

Bloomberg puts it more bluntly: Palmedo describes the situation not as a "one or the other" trade-off, but as "too much to invest in everything." The implication is that Paradigm believes it has enough capital and research capability to invest in both sides, without needing to sacrifice one for the other.

Crypto Has Not Been Abandoned, But Downgraded to "One of the Frontiers"

Palmedo and Huang repeatedly emphasize that they have not abandoned crypto, and this statement needs to be unpacked.

In the list Paradigm has provided for the new fund, crypto still holds an important position: decentralized derivatives exchange Hyperliquid, stablecoin public chain Tempo co-incubated with Stripe, and prediction market platform Kalshi. Investment continues in open source tools like Ethereum development tools Foundry and Reth. These are currently the most active themes in crypto: decentralized trading, stablecoin infrastructure, and regulated event markets.

However, the list of non-crypto investments is equally long: autonomous drone delivery company Zipline, rapid manufacturing platform SendCutSend, space defense startup True Anomaly, and Nous Research (the developers of Hermes Agent) specializing in open-source AI. According to CoinDesk reports, among the projects the new fund has invested in, Zipline had a valuation of $7.6 billion in January of this year, and True Anomaly had a valuation of $2.2 billion in April.

Huang's stance is that crypto and AI are not zero-sum competitors; there is a lot of overlap between the two. Paradigm has also specifically highlighted a cross-project, EVMbench, which is a blockchain security benchmark developed in collaboration with OpenAI. (Disclosure: OpenAI is a competitor of Anthropic.)

For crypto practitioners, the signal here is that even in the eyes of the most steadfast crypto VC, crypto has already transitioned from being the "only lane" to "one of the frontiers." The dilution of funds and attention is a reality, and determining whether this is good or bad for specific projects depends on whether they are situated at the intersection of crypto and AI.

Not Just Paradigm, Old Money in Crypto is Collectively Expanding

Paradigm is not an isolated case; in recent months, crypto VCs have collectively been branching out beyond crypto.

According to Bloomberg, in May, crypto VC Haun Ventures raised $1 billion, expanding its focus to AI while supporting crypto startups. In June, Framework Ventures raised $400 million for its fourth fund, directed at both crypto and AI, robotics, and energy. Along with Paradigm's latest effort, three leading crypto VCs have coincidentally included AI in their investment scope within two months.

This wave of expansion has both defensive and offensive aspects. On the defensive side, the crypto market has become more institutionalized, more regulated, and more concentrated among a few large platforms, with the number of early projects capable of absorbing large venture capital checks decreasing. On the offensive side, AI and robotics are generating a new wave of company formation cycles, where scale and urgency are exactly what VCs are looking for.

For those wanting to enter the crypto primary market, this trend suggests that following top VCs may increasingly make it difficult to invest solely in crypto. These institutions are viewing crypto as part of the "cutting-edge technology stack" instead of the entirety. The next significant company they incubate might not even fall within the crypto category.

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