Analysis of Trends in Crypto Venture Capital: The Evolution from Token Investment to Liquidity Venture Capital

The current financing environment is becoming increasingly severe, mainly due to the decline in upstream capital returns and the challenges faced by limited partners in funding. In the overall venture capital sector, the funds returned to limited partners by funds at various stages have decreased compared to previous years, resulting in a reduction of available capital for existing and newly established venture capital for investment, exacerbating the difficulty for founders in obtaining financing.

This trend has had the following impact on encryption venture capital:

The number of transactions in 2025 has decreased, but the speed of capital deployment is basically on par with 2024. The decline in transaction volume may be related to many venture capital funds nearing the end of their life cycle and a reduction in available funds. However, some large funds are still making significant transactions, keeping the overall capital deployment speed consistent with the previous two years.

In the past two years, merger and acquisition activities in the encryption field have continued to improve, creating favorable conditions for liquidity and exit opportunities. Recent large-scale mergers and acquisitions have provided more assurance for industry consolidation and exit of crypto equity venture capital.

In the past year, the number of transactions has remained generally stable, with some larger-scale later transactions announced to be completed in the fourth quarter of 2024 and the first quarter of 2025. This is mainly due to more transactions being concentrated in the early stages, where the capital is relatively abundant.

Divided by financing stage, the number of transactions in accelerators and launch platforms ranks first. Since 2024, a large number of accelerators and launch platforms have emerged in the market, which may reflect a tightening financing environment, leading founders to prefer launching projects by issuing tokens earlier.

The median size of early financing rounds has rebounded. The financing scale in the earliest stages has continued to grow year-on-year, indicating that funds are still abundant in this stage. The median financing for seed rounds, Series A, and Series B has approached or rebounded to the levels of 2022.

Encryption Venture Capital Future Trend Prediction

1. The Token will become the main investment mechanism.

The market will shift from a "token + equity" dual structure to a model of "single asset carrying value". In the future, there will be a stronger emphasis on one asset corresponding to a set of value accumulation logic.

2. The integration of fintech venture capital and encryption venture capital is accelerating.

Financial technology investors are gradually transforming into encryption investors, focusing on next-generation payment networks, new digital banks, and blockchain-based asset Tokenization platforms. Encryption venture capital faces competitive pressure, and those without a foothold in stablecoins or the payment sector will struggle to compete with financial technology venture capital that has rich payment experience.

3. The Rise of "Liquidity Venture Capital"

"Liquidity venture capital" refers to seeking investment opportunities similar to venture capital in the market of tradable tokens. This model has the following advantages:

• Liquidity: Publicly traded assets or tokens have higher liquidity, which means faster exit paths.
• Accessibility: Compared to the high thresholds of private equity venture capital, Liquidity venture capital allows investors to directly purchase Tokens and also through over-the-counter transactions.
• Position Management: The company issues coins in advance so that small funds can also establish meaningful positions, while large funds can invest in high market cap circulating Tokens.
• Fund Operations: Well-performing crypto venture capital funds typically allocate reserve assets to mainstream Tokens to achieve excess returns. It is expected that during bear market cycles, venture capital funds will more frequently call upon funds early and invest in quality Tokens.

The encryption sector will continue to lead the innovation frontier of venture capital. The integration of public and private capital markets is the development trend of venture capital, and more traditional venture capital funds are choosing to layout in the liquidity market or the secondary equity market, while the crypto space has already taken a step ahead in this regard. With more assets being put on-chain, it is expected that more companies will opt for "on-chain priority" financing methods.

Finally, the return distribution of the encryption market often exhibits a "power law distribution" compared to traditional venture capital - top encryption assets are not only competing to become digital sovereign currencies but also vying for foundational positions in the new financial economy. Although the return distribution is more extreme, it is precisely this potential for asymmetric returns that will continue to attract significant capital inflow into encryption venture capital.