Analysis of the three major trends in crypto venture capital: from token-dominated to liquidity venture capital

Original article: Mason Nystrom , Investor at Pantera Capital

Compiled by: Zen, PANews

Financing has become difficult today as upstream DPI (return on distributed capital) and LP (limited partner) funding face challenges.

In the broader venture capital space, funds are returning less money to LPs over the same period than before. This in turn has reduced the amount of “dry powder” available for investment by existing and new VCs, making it more difficult for founders to raise funds.

What does this mean for crypto VCs?

The number of deals slowed down in 2025, but the pace of capital deployment was the same as in 2024. The decrease in the number of deals may be related to the fact that many VC funds are nearing the end of their life cycle and the available "dry powder" is decreasing. However, some large funds still completed large deals, so the pace of capital deployment is consistent with the previous two years.

Over the past two years, M&A activity in the crypto space has continued to improve, which is conducive to liquidity and exit opportunities. Recent large-scale mergers and acquisitions, including NinjaTrader, Privy, Bridge, Deribit, HiddenRoad, etc., have provided more guarantees for industry consolidation and crypto equity venture exits.

Deal count has generally remained stable over the past year, with some larger late-stage deals announced in Q4 2024 and Q1 2025. This is primarily due to more deals being concentrated in the Pre-seed, Seed, and Accelerator stages, where capital has been relatively plentiful.

By financing stage, accelerators and launchpads rank first in terms of the number of transactions. Since 2024, a large number of accelerators and launchpads have emerged in the market, which may reflect the tightening financing environment and founders’ preference for early token issuance to launch projects.

Median size of early-stage financing rounds has rebounded. Pre-seed financing sizes continued to grow year-on-year, indicating that funding for the earliest stages remains sufficient. Median financing sizes for seed, A, and B rounds have approached or rebounded to 2022 levels.

Crypto VC Prediction 1: Tokens will become the primary investment mechanism

The market will shift from a dual structure of "tokens + equity" to a model of "single asset carrying value". One asset, one set of value accumulation logic.

Crypto Venture Capital Prediction 2: Fintech Venture Capital and Crypto Venture Capital Accelerate Integration

Every fintech investor is becoming a crypto investor, and they are paying attention to the next generation of payment networks, new digital banks, and blockchain-based asset tokenization platforms. Crypto VCs are facing competitive pressure, and crypto VCs that have not deployed stablecoins/payments will find it difficult to compete with fintech VCs with rich payment experience.

Crypto Venture Capital Prediction 3: The Rise of Liquid Venture Capital

“Liquidity VC” is about finding quasi-VC opportunities in the tradable token market:

• Liquidity — Publicly traded assets/tokens have higher liquidity, meaning a faster exit path
• Availability - Private VC investment has a high threshold, while liquidity VC allows investors to purchase tokens directly without having to "grab projects" or through over-the-counter (OTC) transactions.
• Position management - the company issues tokens in advance so that small funds can also lay out meaningful positions, and large funds can also invest in high-market-value circulating tokens
• Funding operations - The best performing crypto VC funds usually allocate reserve assets to mainstream tokens such as BTC and ETH, and obtain excess returns. I personally expect that in the bear market cycle, VC funds will more often call funds in advance and invest in high-quality tokens.

The crypto space will continue to be at the forefront of venture capital. The integration of public and private capital markets is a trend in venture capital. More and more traditional VC funds are choosing to invest in liquid markets (such as post-IPO holding tools) or secondary equity markets, and the crypto space has long been on this path. Crypto continues to lead in capital market innovation. As more assets are put on the chain, more companies will choose a "chain-first" financing approach.

Finally, the results of the crypto market tend to be more "power-law distributed" than traditional venture capital - the top crypto assets not only compete to become digital sovereign currencies, but also compete to become the foundation of the new financial economy. Although the return distribution is more extreme, it is precisely because of this that crypto venture capital will still attract a large amount of capital inflows and pursue asymmetric returns.