The world of cryptocurrency venture capital is at a crossroads. While some firms still hold a seat at the table, the path forward is fraught with challenges. As one industry veteran put it: “The day after tomorrow may be bright, but surviving tomorrow—the hardest part—is the real test.”
In a previous article, we explored how prominent fund ABCDE halted fundraising, signaling a broader need for crypto VCs to undergo a “version upgrade” in response to shifting market cycles and evolving monetization models. Now, as the crypto market shows signs of recovery, investment firms are repositioning themselves—some rebalancing portfolios, others chasing new narratives like on-chain trading, stablecoins, and PayFi.
Odaily recently conducted in-depth interviews with leading crypto venture funds, including ArkStream Capital and YBB Capital, to uncover how these institutions are adapting—and what their strategies reveal about the future of crypto investing.
The New Era of Crypto: Liquidity Reigns Supreme
Market Evolution in Focus
To understand where crypto VC is headed, we must first examine how the market has changed—and what remains constant.
ArkStream Capital: Crypto’s Core Is Still Fintech 2.0
Ye Su (@allen_su1024), founder of ArkStream Capital, argues that the true inflection point for the crypto market was 2023. Before this year, the industry was largely focused on building foundational infrastructure—akin to the early days of AI. After 2023, the approval of Bitcoin and Ethereum ETFs accelerated mainstream adoption, expanding participation beyond crypto-native users to traditional finance players.
Three key shifts define this new era:
- Growth Model: From narrative-driven hype to fundamentals-based performance. Tokens with real revenue and use cases have weathered downturns far better than speculative altcoins.
- Investor Base: The influx of institutional investors has reshaped valuation models. Web3 projects once valued at $20–30M during seed rounds now face more scrutiny, helping deflate earlier bubbles.
- Token Distribution: The cycle has come full circle—from fair ICOs to VC-dominated allocations with low liquidity, and now back to community-driven models like meme coins and on-chain launches.
Yet, despite these changes, the core thesis remains unchanged: crypto is fundamentally about Fintech 2.0—a decentralized global ledger enabling efficient asset transfer and financial innovation. Even sectors like gaming and social media remain deeply financialized at their core.
👉 Discover how top VCs are navigating this financial evolution in crypto.
YBB Capital: Lower Barriers, Higher Stakes
John (@John_YBB), co-founder of YBB Capital, echoes this sentiment but emphasizes a different catalyst: the democratization of asset issuance.
“This cycle isn’t driven by new narratives—it’s powered by drastically lower barriers to launching tokens. That’s what’s fueling liquidity surges on DEXs and driving demand for derivatives.”
Additional shifts include:
- Institutional Dominance: With Bitcoin ETFs managing over $250 billion in assets, traditional finance now plays a central role.
- Persistent Issues: Meme coin speculation and superficial DeFi innovations continue to misallocate resources.
- Bitcoin’s Unchanged Narrative: BTC remains “digital gold,” though its decoupling from altcoins grows stronger.
Summary: Cycles Continue, But Greed Is Louder Than Ever
While market cycles persist, the driving force today is less ideology and more profit-seeking behavior. The industry’s inability to produce scalable infrastructure applications has left it reliant on internal “casino effects” and external liquidity injections from mainstream finance.
This reality has forced VCs to rethink their business models.
The VC Pivot: From Passive Investing to Active Participation
Bill Qian on Vintage Risk and Future Hope
Bill Qian (@billqian_uae), co-founder of Cypher, M2, and Phoenix Funds, reflects on the painful lessons of recent years:
“We backed over 10 VC funds with top-tier GPs. But due to poor timing—investing in 2022/2023—we’ve had to write down 60% of our LP investments. Sometimes you do everything right and still lose—to time.”
Despite this, he remains optimistic about the next cycle: “After destruction comes rebirth. Just like Web2 VCs rose from the dot-com ashes.”
YBB Capital: From Skepticism to Strategic Embrace
YBB Capital once avoided meme coins due to ethical concerns. But as the ecosystem matured—with structured launch teams, marketing funnels, and community coordination—they adapted.
“We didn’t invest in meme coins directly, but we backed Meme Launchpads like Pump.Fun because they enable sustainable engagement.”
Today, YBB focuses on high-liquidity narratives:
- On-chain infrastructure: DEXs, chain abstraction
- Cross-sector convergence: RWA, AI + crypto, stablecoin ecosystems
- Future bets: AI economies, metaverse revival via mature tech
They believe long-term value lies not in pump-and-dump schemes but in projects that grow user bases sustainably.
👉 See how leading investors identify sustainable crypto opportunities.
ArkStream: From Tier-1 to 1.5-Tier Investing
ArkStream has shifted from traditional early-stage investing to what they call “1.5-tier” OTC deals—investing in post-launch projects with clearer liquidity paths.
Why? Because:
- Lock-up periods have extended from 1–2 years to 4–6 years.
- Early exit opportunities have shrunk.
- Market attention now favors quick-turnaround trades.
Now, ArkStream actively explores two parallel tracks:
- “Underground” finance: Trading bots, on-chain derivatives
- “Establishment” narratives: RWA, PayFi, stablecoin rails
“We’re looking for deep collaboration with innovators in both spaces.”
Summary: On-Chain Is the New Gold Rush
VC consensus is clear: the next wave of value will come from on-chain activity, amplified by macro trends like AI and regulatory clarity—especially under U.S. policy shifts.
The Trump Effect: A Catalyst for Crypto Maturation?
Waterdrip Capital: Welcome to the ‘Chaos Era’
Dasha Shan, founder of Waterdrip Capital, describes the post-Trump-election landscape as a “chaos era”—a period of global instability that paradoxically strengthens crypto’s role.
Key insights:
- Trump’s tariff policies caused market turbulence.
- But his administration also signaled intent to treat Bitcoin as a reserve asset, alongside gold and USD-backed stablecoins.
- This trio—dollar, gold, Bitcoin—could form a new financial anchor system.
For founders, new opportunities emerge in:
- Bitcoin DeFi (BTCFi)
- Multi-chain ecosystems
- Real-world assets (RWA)
- PayFi and tokenized equities
YBB Capital: Trump Created a Liquidity Black Hole
John argues that Trump’s real impact isn’t policy—it’s attention engineering.
“Trump used TRUMP memecoins to convert political attention into financial liquidity—a ‘narrative black hole’ sucking in capital.”
He also notes:
- Crypto markets are now “equitized”—mirroring Wall Street volatility.
Spot ETFs have split Bitcoin into two forms:
- White Bitcoin: Institutionalized, taxable, regulated—driven by speculation.
- Black Bitcoin: Decentralized, anonymous—true to original ideals.
- Power is shifting toward “white Bitcoin,” controlled by U.S. institutions.
ArkStream: Bitcoin vs. Gold – The Next Decade’s Battle
Ye Su believes the critical question is whether Bitcoin can become a global safe-haven asset, rivaling gold.
“If U.S. sovereign funds adopt BTC, it could grow 8–10x from current levels.”
But without institutional backing, its ceiling remains low.
Summary: Crypto Is No Longer Isolated
Trump’s unpredictable policies have made crypto more volatile—but also more relevant. The era of crypto as a niche asset is over. It’s now intertwined with geopolitics, macroeconomics, and mainstream finance.
Final Thought: No Misallocated Assets—Only Misaligned Projects
Is there mispricing in crypto?
At a micro level—yes. Many projects suffer from:
- Overvaluation vs. utility
- Speculative tokenomics
- Poor alignment between exchanges, teams, and users
But at a macro level? Capital flows efficiently. Liquidity follows where wealth is created.
As Ye Su puts it:
“Retail users—the silent majority—decide market direction. Projects must adapt to demand.”
There are no inherently “wrong” assets—only those mismatched to their time.
Crypto never sleeps. And liquidity—like water—always finds its level.
👉 Stay ahead of the next big shift in crypto liquidity.
Frequently Asked Questions (FAQ)
Q: Why are crypto VCs shifting from early-stage to 1.5-tier investments?
A: Extended lock-up periods and reduced exit opportunities have made traditional VC models less viable. OTC deals offer faster liquidity and lower risk.
Q: Are meme coins a legitimate investment focus for serious VCs?
A: Direct investment in meme coins is rare due to high risk. However, many VCs back enabling tools like launchpads and analytics platforms that benefit from meme cycles sustainably.
Q: How has the Bitcoin ETF changed crypto investing?
A: It institutionalized Bitcoin, aligning it with traditional finance regulations and tax frameworks. This boosted liquidity but also diluted its decentralization ethos.
Q: What does “PayFi” mean in crypto context?
A: PayFi refers to blockchain-based payment systems that integrate with traditional finance—enabling faster settlements, lower fees, and cross-border transactions.
Q: Can Bitcoin really compete with gold as a reserve asset?
A: It’s possible—if adopted by sovereign wealth funds or central banks. Currently, Bitcoin’s market cap is far below gold’s, leaving room for growth if trust and stability increase.
Q: How do RWA (Real World Assets) projects create value?
A: By tokenizing physical assets like real estate or bonds, RWAs bring transparency, fractional ownership, and global liquidity to traditionally illiquid markets.