I’ve been covering the crypto VC space for many years now, and the last couple of years have felt different. Earlier, there was a steady flow of early-stage funding announcements. That slowed down a lot, and even though things have picked up a bit this year, it still doesn’t feel the same.

Most investors I spoke to said the era of easy fundraising in crypto is over and unlikely to come back. But several also said this is a healthy reset, and the space is just more strict now.

Investors now want to see real users and revenue before writing checks. "The level of impatience for quick returns surprised me," said Paul Brody, a former global blockchain leader at EY and now the founder and CEO of Nightfall Networks, a privacy-focused blockchain startup. Brody started raising funds for his new project last month and said the focus of investors has clearly shifted toward how and when returns will come.

"My coaches are telling me that this is driven by the outsize growth rates being seen in AI and how that’s raising expectations for the kind of revenue you can ramp up to quickly," Brody said. "I’m constantly trying to balance how fast I think I can realistically go with the expectation of fast growth and returns."

The big shift

Crypto VC has moved through different cycles in recent years. The 2018–2020 period had low capital and fewer funds, which meant less competition, noted Ray Hindi, co-founder and managing partner of L1D AG. At the same time, retail markets were strong, so one could exit investments at a profit despite them being “fundamentally flawed," Hindi said.

In contrast, 2021–2022 saw a huge amount of capitalenter the space, with many funds investing at high valuations. This led to poor outcomes when the market turned during the 2022 crypto crisis and regulatory pressure increased.

Looking ahead, Hindi said the next few years could be among the strongest vintages since 2018. Many VCs today are struggling to raise funds, which is reducing competition, while the remaining firms are focusing more on fundamentally strong projects, he said, noting that regulation is also improving.

"Things are about to turn around for VC, and we at L1D are starting to commit to funds again following a two and a half year pause," Hindi said. "Crypto VC is in a good place, and the 2026–27 vintages will be strong ones. VCs are back in control, and that's a good thing for the industry: realistic valuations, higher-quality operators, and hopefully far fewer of the unethical founders that have plagued our space," he added.

A major reason behind this shift is how much the token model has changed. Anirudh Pai, partner at Robot Ventures, said the token model has broken down as a reliable exit, with low-float, high valuation launches underperforming and secondary markets punishing projects with large future unlocks. Thomas Klocanas, managing partner at Strobe Ventures (formerly of BlockTower), also said, "Poor token designs and thin liquidity across most tokens have been exposed, which has had major implications for what’s fundable for most funds in the space, which skewed short to medium term token investments."

This has pushed investors back toward more traditional venture thinking. Equity is getting more attention again, and when tokens are used, there is a much stronger focus on value accrual and realistic valuations.

"Tokens are out of favor right now, but I believe that's a cyclical, not secular phenomenon," said Cosmo Jiang, general partner at Pantera Capital. "I strongly believe tokens are a disruptive new form of capital formation and there will be many more token-based businesses."

Hindi echoed this view, saying that while equity is easier from a governance perspective, governance around tokens is also improving and "the risk premium is becoming more attractive by the day," adding that he expects tokens to continue to be "very interesting" for his firm.

Dan Elitzer, co-founder at Nascent, also said tokens remain an important innovation, but the models need to improve.

Another big shift is happening at the fund level. Many crypto VCs are finding it harder to raise capital, and that is directly affecting how much gets deployed into startups.

Klocanas said many funds from the 2020–2022 period deployed at high valuations and have not yet returned capital, which has made limited partners or LPs more cautious. Pai said newer funds raising in 2024 and 2025 have struggled to show results, making it harder to secure fresh capital. Jed Breed, founder and general partner of Breed VC, said the "absolute hardest" part of being a crypto VC today is raising a fund itself. "The category is not nearly as popular as it once was with LP capital," he said.

Another factor making crypto VC feel harder is the broader shift in venture, especially with the rise of AI. "AI ate the oxygen — both the talent and the LP attention," Pai said. "A lot of would-be crypto founders are building AI companies now, and the marginal LP dollar has an obvious competing home."

With these changes, crypto funding has become more focused. Across conversations, the same sectors kept coming up: stablecoins, payments, tokenization, real-world assets, prediction markets, and financial infrastructure. These are areas where investors see clear demand, stronger product-market fit, and revenue profiles.

What lies ahead

Looking ahead, most investors said they see the shift in crypto VC as structural, even if some conditions improve with the market.

Klocanas said fundraising for VCs may recover as markets improve, but the higher bar for startups is likely to remain. Pai said crypto is no longer a "greenfield" space where being early is enough, and will behave more like other venture markets going forward. Richard Galvin, executive chairman and CIO at Digital Asset Capital Management, said it is unlikely the industry returns to the old model where pre-product or pre-revenue projects can launch tokens at high valuations.

"Traditional VC and crypto VC are going to blend pretty quickly," said Tom Dunleavy, head of venture at Varys Capital, particularly as crypto fades into the background and becomes part of other industries like AI and finance. One has to underwrite these businesses less on speculation and more on fundamentals, he added.