Crypto VCs are finally no longer telling the same story

Author: Zhou, ChainCatcher

Many people believe that crypto VCs are heading into their twilight years.

Over the past decade, crypto VCs have been highly homogeneous—clustering in the same sectors, telling similar stories, competing for the same projects. It may seem lively, but internally, the industry is fragile.

But what is happening now might be one of the most promising moments since the industry’s inception—the market is finally showing real differentiation.

By the end of February 2026, two fundraising announcements appeared in succession.

One was Dragonfly Capital completing its fourth fundraise, totaling $650 million, focusing on stablecoins, on-chain financial infrastructure, and real-world asset tokenization.

On the other side, Paradigm is seeking up to $1.5 billion for its new fund, expanding its investment scope from crypto to frontier technologies like AI and robotics.

Both are top-tier crypto VCs in a downturn cycle—why have they taken such different paths?

If we include a16z Crypto in the picture, the question becomes even more interesting. Recently, the firm is raising $2 billion for its fifth fund.

These three funds represent three very different responses to the current industry challenges faced by crypto VCs.

Conserve: a16z Crypto’s Long-Term Logic

In the fundraising landscape of crypto VCs, a16z Crypto has long held a top position. It is a dedicated crypto investment fund under Andreessen Horowitz (a16z), established in 2013, with four funds raised so far, totaling over $7.6 billion, making it one of the largest crypto funds globally.

Earlier this year, a16z completed a new round of fundraising totaling $15 billion, covering infrastructure, application layers, and growth funds, with a focus on the intersection of AI and crypto as a key investment area.

According to Forbes, a16z Crypto is raising its fifth fund, targeting about $2 billion, aiming to close before mid-2026.

a16z Crypto partner Chris Dixon views blockchain as the next infrastructure of the internet, believing the crypto industry is in a long “foundational period,” similar to how neural network papers in 1943 laid the groundwork for today’s AI, requiring decades of development to reach mainstream adoption.

Dixon has publicly stated that 95% of the assets held by a16z Crypto are from investments made early on, because in venture capital, selling high-quality assets too early is the worst decision.

Their annual industry reports send a clear signal: even in downturns, they are still diligently studying what’s happening in the industry.

Their investors are long-term institutional capital and seasoned believers in the industry—those who still believe in crypto’s future.

For them, as long as they believe in crypto’s potential, a16z Crypto is the natural choice.

Transform: Dragonfly’s Financial Evolution

Founded in 2018, Dragonfly started as an early-stage crypto VC connecting Asian and US markets. Its first fund was just $100 million, with its core advantage being the geographic arbitrage of co-founders operating across China and the US.

Since 2019, Dragonfly has gradually expanded into the secondary market, managing liquidity funds and building its own trading team. This not only serves as a risk hedging tool but also provides real-time market data for primary market investments, aiding project evaluation.

In 2022, Dragonfly acquired Metastable, a crypto hedge fund co-founded by Naval Ravikant in 2014, integrating it into its operations. This created three parallel business lines: Dragonfly Ventures (primary investments), Dragonfly Liquid (liquidity strategies), and Metastable (hedge fund).

The core difference between Dragonfly and pure primary crypto funds lies in their judgment and trading capabilities—its ability to operate across both primary and secondary markets.

However, building this system was not overnight. Establishing an investment framework that spans both markets requires developing two completely different decision-making, risk management, and talent structures—deep technical judgment for early-stage projects, and precise quantitative skills for market microstructure in secondary trading.

Dragonfly’s external job postings have explicitly required candidates to have expertise in delta-neutral hedging and derivatives risk management—rare skills in crypto, requiring long adaptation periods even when recruited from traditional finance.

This trading system is a barrier accumulated over years, making it difficult for other funds to replicate directly.

Today, Dragonfly is a trading-driven institution operating across primary and secondary markets, managing about $4 billion in assets, with investments in unicorns like Ethena, Polymarket, and Monad Labs.

Behind this, however, lies a less optimistic industry trend.

According to RootData, in 2025, the crypto primary market raised $22.73 billion (excluding post-IPO and debt financing), a 120.6% increase from 2024; but the number of funding events was only 933, down 40.3% from last year—near a five-year low—and monthly funding events are trending downward.

Total funding amount is rising, but the number of projects receiving funding is decreasing, indicating that capital is becoming more concentrated, leaving less room for small and early-stage projects.

Dragonfly managing partner Haseeb Qureshi believes that the era of broad crypto applications with non-financial attributes has been disproven. The new fund will focus on stablecoins, DeFi, and on-chain financial services.

He pointed out that recent investments in Ethena, Polymarket, Rain, and Mesh demonstrate this shift: “Crypto’s coverage is about to explode, and we want to support founders at the center.”

Their investors are those who believe in blockchain financialization, trading-driven allocators, and pragmatic crypto investors.

They may not need a grand narrative about crypto changing the world; real liquidity and sustainable trading returns are what they seek.

The key to Dragonfly’s path is to go with the trend—crypto is becoming increasingly financialized, and they are early adopters of turning this trend into their core competitive advantage.

Breakthrough: Paradigm’s Boundary Narrative

Paradigm’s story begins with a set of numbers.

In 2021, Paradigm raised $2.5 billion, setting a record for the largest single crypto fund at the time.

By 2024, its third fund shrank to $850 million.

Now, it aims for $1.5 billion, expanding from crypto into AI, robotics, and other frontier technologies.

Paradigm’s foundation is VC-driven incubation. Co-founder Matt Huang comes from Sequoia Capital, having founded a machine learning startup at 19 that was acquired by Twitter; co-founder Fred Ehrsam was a Coinbase co-founder.

Their strength lies in early trend judgment and technical risk control. Matt Huang’s colleague Patrick Collison, founder of Stripe, described him as “calm, rigorous, and patient—traits well-suited for complex technologies with influence later.”

Paradigm’s portfolio includes early protocols like Uniswap and Coinbase, which established its industry position.

As a result, Paradigm is often described as “more like a research lab combined with an engineering organization than a traditional VC.”

After the collapse of FTX, Paradigm took three years to rebuild. But the shortage of quality early-stage projects in crypto remains a fundamental problem—without good projects, even a strong reputation cannot prevent difficulties.

Thus, Paradigm’s shift toward AI is not a sudden whim.

In fact, as early as 2023, Paradigm quietly removed references to Web3 from its website. Matt Huang explained that “AI progress is too interesting to ignore,” and emphasized that crypto and AI are not zero-sum; they will overlap significantly. Earlier this year, Paradigm partnered with OpenAI to release EVMbench, a benchmark tool to test whether AI models can identify and fix smart contract vulnerabilities.

According to OECD data, in 2025, global VC investment in AI will reach $258.7 billion, accounting for 61% of total VC investments worldwide, up from only 30% in 2022.

On a more practical level, Paradigm’s move into AI has structural reasons.

Within the entire crypto VC landscape, a16z Crypto maintains a long-term capital advantage, while Dragonfly is the most transaction-capable player in the financialization track.

Paradigm’s team DNA cannot replicate a16z Crypto’s long-term belief narrative, nor is it suited for Dragonfly’s trading-driven approach.

Its team’s nature means it can only tell stories of integrated innovation, aiming to attract new funds that are no longer interested in pure crypto but are willing to bet on cross-industry technological fusion.

This is the underlying reason for Paradigm’s pivot and its only space for misalignment.

Alexander Pack, managing partner at Hack VC (former Dragonfly partner), said that KKR and Bain Capital have shifted from private equity to credit and public markets, and a16z has funds across various tech segments. Paradigm’s move reflects the industry’s broader trend toward maturity and re-integration into the wider tech ecosystem.

Three Paradigms, Three Bets

Looking at these three funds together reveals a clear ideological divergence.

Each answers the same fundamental question: during the crypto industry’s downturn, why does this fund still exist?

a16z Crypto’s answer is scale and faith—big enough to survive cycles, deep enough to represent the industry, continuously conveying confidence to the market.

Dragonfly’s answer is capability and focus—deeply engaged in crypto financialization, leveraging trading skills to compensate for primary market limitations, maintaining active capital during scarce project periods.

Paradigm’s answer is narrative and boundary-breaking—using AI and crypto fusion stories to attract investors beyond traditional crypto VCs, expanding its scope from a single industry to the broader wave of technological integration.

Three funds, three responses. No single paradigm is the final answer, nor can any be easily copied—what stories they tell ultimately depends on their team’s DNA.

This may be a sign of crypto VC maturing: no longer a herd rushing down the same path, but each finding its own way. Homogeneity makes the industry fragile; diversity allows it to thrive.