The financing chill has not receded: Why is it still difficult for encryption venture capital funds to raise capital during a bull run?

Despite the continuous recovery of the Crypto Assets market during the bull run, the fundraising environment remains severe for many cryptocurrency venture capital funds. Since the collapse of Terra (LUNA) and FTX in 2022, the trust of limited partners (LPs) has been damaged, and capital flows have begun to concentrate on a few top funds, putting immense survival pressure on the vast majority of small and medium-sized funds.

Financing Difficulties in a Bull Run

Lattice Fund co-founder Regan Bozman pointed out that although market sentiment has warmed compared to the bear market, this is not enough to offset LP concerns about venture capital performance.

Today, Crypto Assets venture capital funds not only have to compete with traditional assets but also face the diversion of funds by ETFs and Digital Asset Trusts (DAT).

Michael Bucella, co-founder of Neoclassic Capital, stated that only funds with clear advantages or past outstanding returns can attract new LP investments.

Capital Centralization: Data Reveals the Harsh Reality

Rob Hadick, a general partner at Dragonfly, mentioned that in 2024, only 20 funds attracted 60% of the LP capital, while the remaining 488 funds could only share the remaining 40%.

The Block Pro data shows:

In 2022: 329 funds raised 86 billion dollars

2023: Plummeted to 11.2 billion USD

2024: Further down to 7.95 billion USD

As of 2025: 28 funds have raised only 3.7 billion dollars.

This kind of capital centralization means that small, undifferentiated funds will find it harder to secure funding support.

External factors squeeze capital inflow

LP structure change:

Family offices, wealthy individuals, and crypto-native funds remain actively involved.

Pension funds, donation funds, mother funds, and corporate venture capital sectors have significantly withdrawn.

Interest rates are rising: since March 2022, funds have been more inclined towards safe, highly liquid assets.

Centralized Earnings: The main earnings of this bull run are concentrated in BTC, ETH, and a few blue-chip tokens, lacking the "altcoin bidding" effect.

AI Divergence Effect: Artificial intelligence has become the new darling of technology investments, siphoning off some of the funds that might have originally flowed into the Crypto Assets space.

Future Landscape: Fund Integration and Model Evolution

Many industry insiders predict that there will be a wave of fund consolidation in the coming years:

* Surviving Types:

small funds with a scale below 50 million USD that focus on niche areas and provide stable returns

Large funds with strong capital such as Paradigm and a16z

* Type of Disappearance:

Lack of differentiation and poor returns of medium-sized funds

Erick Zhang from Nomad Capital predicts that the number of pure Crypto Assets funds will decrease in the future, and Web2 venture capital will venture into encryption, while Crypto Assets funds will also reverse enter the Web2 field, forming cross-border integration.

LP Return Schedule and Trigger Conditions

Capital shifts to small and medium-sized tokens: Steve Lee of Neoclassic believes that once on-chain capital (especially stablecoins) drives the prosperity of small and medium-sized token ecosystems, LPs will return.

Declining interest rates and active mergers: Sep Alavi of White Star Capital predicts that LP inflows may return by mid-2026.

Regulatory clarity: Hadick believes that, aside from pensions, most institutional investors have returned, and the remaining key factor is regulatory certainty.

A New Narrative Emerges: Early venture capital founders point out that LPs will only flood back in on a large scale when the next "super hot topic" (such as stablecoins or breakthrough applications) arises.

Conclusion

Even in a bull run, the financing environment for crypto venture capital funds remains challenging. Capital centralization, cautious attitudes from LPs, and the diversion of external investment trends have posed unprecedented challenges for small and medium-sized funds. The future survival strategy will depend on differentiated positioning, stable returns, and the ability to seize the next "super narrative" that ignites the market.