First, let's solve an arithmetic problem.

A VC firm manages 12.7 billion dollars in assets. Its last fund raised 850 million dollars. The fund before that was 2.5 billion dollars.

The direction is reversed.

The scale is shrinking, not because there isn't enough money to raise, but because there aren't enough worthy projects to invest in. Now, this company wants to turn this trend around; where does it need to look for the next sufficiently large pool?

On February 28, 2026, The Wall Street Journal provided the answer: cryptocurrency investment firm Paradigm is raising a new fund with a maximum size of 1.5 billion dollars, expanding its investment direction to artificial intelligence, robotics, and other cutting-edge technologies.

This is not a sudden decision. It is an arithmetic problem that has been calculated for a long time, just now revealing the answer.

First, lay out the numbers

In 2025, the total global VC investment in cryptocurrencies reached 49.8 billion dollars. That sounds like good news. But if we only look at this one number, we will misjudge one thing.

In the same year, the number of crypto VC transactions plummeted by about 60% year-over-year, falling from about 2,900 to 1,200. Money is increasing, while projects are decreasing. The funds flowing into the crypto space are increasingly concentrated in a few large transactions rather than scattered across hundreds of early-stage projects.

For the vast majority of small and medium-sized funds, this may not be a problem. But for Paradigm, this is a structural issue. Paradigm manages 12.7 billion dollars in assets, making it one of the largest dedicated cryptocurrency VCs in the world. Its problem is not finding projects, but rather not finding enough, large, and early-stage projects that can absorb this magnitude of funding while maintaining the expected returns to which it is accustomed.

In 2021, Paradigm raised the largest cryptocurrency fund in history, at 2.5 billion dollars. By 2024, it announced its third fund, which was 850 million dollars, only a third of the previous one.

This contraction is not a sign of weakness but a proactive adaptation to a narrower market. However, it also indicates one thing: relying solely on crypto, Paradigm has found it very difficult to chart a path for its scale.

After FTX, Paradigm began to ask a question

To understand this 1.5 billion dollars today, we must first return to November 2022.

That month, FTX collapsed. Sam Bankman-Fried's empire turned to ashes within days, taking countless institutional funds down with it. Paradigm's investment in FTX was 278 million dollars, which ultimately was reduced to zero.

For a top-tier institution known for being "research-driven" and positioning itself as tech-savvy, this was not just a bad debt. It was a public misjudgment that needed to be explained to its limited partners (LPs), to the market, and also to itself.

What happened next seemed rather strange at the time. In 2023, someone noticed that Paradigm's official website had quietly changed: all mentions of "crypto" and "Web3" were removed and replaced with the more neutral term "technology investment."

This change had no official announcement but was soon discovered by the community, sparking intense discussion. The biggest concern was: Is Paradigm running away?

Co-founder Matt Huang had to come out to extinguish the fire. He tweeted that Paradigm had "never been more excited about crypto than now," adding, "The developments in AI are too remarkable to ignore. Framing AI and crypto as zero-sum competitors is a popular but erroneous narrative. We do not agree. Both are interesting and will have a lot of overlap."

This was a public relations clarification, but it also conveyed a true sentiment: internally, Paradigm was already seriously considering AI.

After FTX, the question that had to be answered was: What to bet on for the next decade?

Matt Huang is already working on the answer

If we only look at Paradigm's official announcements, the company's transformation seems to have just started today. But if we look at the actual actions of Matt Huang over the past two years, you'll find that he has not just been a crypto investor.

In 2024, Paradigm invested 50 million dollars in Nous Research, an AI infrastructure company focused on research and development of open-source large language models. This is not a small "exploratory" investment; 50 million dollars is a serious bet for Paradigm's scale.

In February of this year, Paradigm also jointly released EVMbench with OpenAI, a benchmarking tool for evaluating different AI models' ability to detect and fix smart contract vulnerabilities. The core infrastructure of cryptocurrency meets AI capability assessment, combining both areas on the same table.

Meanwhile, Matt Huang is also building another company: Tempo. This is a stablecoin payment infrastructure company, with Matt Huang as a co-founder, and his board membership at Stripe aligns closely with this direction. Stripe established a strategic partnership with Paradigm in 2025, and it also launched a stablecoin payment product that same year.

Looking at all this together, Matt Huang is not "going to invest in AI"; he has been living in the intersection of AI and crypto for at least two years.

What he is betting on is not AI, nor crypto, but that these two will collide at some point. And when AI agents start needing to execute transactions on-chain, when robots require a programmable monetary system, that point of impact will be Paradigm's next battlefield.

Why AI×Crypto, rather than a transformation to AI

Paradigm's foray into AI does not mean it is competing with a16z or Sequoia for the same set of projects.

There is a narrative error that is easy to make here: interpreting Paradigm's new fund as "another VC transitioning to AI." But if that is the case, it has no advantages; the general AI field is already crowded with traditional VC giants that have deeper backgrounds and stronger resources.

The real logic of Paradigm is that it does not intend to compete for the general AI pie; it wants to invest in the crossover area that others have not yet fully recognized.

AI agents are currently one of the hottest concepts. These agents, capable of autonomously executing tasks, have begun to replace human effort in various scenarios: searching, coding, analyzing data, and managing processes. But there is one thing they have not solved: money.

When an AI agent needs to make a payment, receive money, or transfer funds between different services, what does it use? PayPal? A bank account? These systems are designed for humans, requiring identity verification and manual authorization, which are incompatible with the logic of machine autonomy.

But stablecoins can. Smart contracts can. Programmable money can.

This is why Matt Huang is simultaneously working on Tempo (stablecoin payments) and investing in Nous Research (AI infrastructure): he believes these two lines will eventually merge, and Paradigm has the ability to bet on both sides and capture maximum returns at the moment of that merger.

This is not a transformation; it is an expansion. Expanding into a space that he believes others have not fully comprehended.

LPs need a new story

There is also a practical aspect that must be clarified.

Paradigm's LPs, the institutions and individuals that entrust their money to be managed, saw a fundraising ambition of 2.5 billion dollars in 2021, and a contraction to 850 million dollars in 2024.

Such a significant discrepancy between the two fund sizes requires an explanation. It also needs a persuasive narrative about the next fund.

"Continue to invest in early crypto projects" - this story was already difficult to support the fundraising target of 1.5 billion dollars by 2024. But "using crypto's technical advantages to cut into cutting-edge technologies during the hottest era of AI and robotics" can.

In 2025, 61% of global VC funds flowed into the AI sector, amounting to about 258.7 billion dollars. This is the largest pool in the venture capital field today. The 1.5 billion Paradigm is raising this time aims to tap into this pool rather than continue guarding a shrinking lake. For LPs, this is a bigger story, and also a more credible growth logic.

Now we can return to 2023. That year, when Matt Huang was forced to clarify the website redesign incident, he said: "AI and crypto are not zero-sum competitors."

At the time, this statement felt more like a defensive move. Calming the community, preventing LP panic, while also leaving himself room to explore AI. But if we reinterpret it in today's context, it seems more like an early warning.

Paradigm took three years to emerge from the ruins of FTX. It did not choose the simplest path of scaling down, focusing on crypto, and waiting for the next bull market. It chose a more challenging path with greater imaginative space: betting on the convergence of AI and crypto, establishing positions in both tracks simultaneously, and then waiting for the moment they meet.

Today's 1.5 billion dollar fund is a milestone in the journey down this path.

Matt Huang has yet to publicly respond to today's report from The Wall Street Journal. But his Tempo is still being built, Nous Research is still running, and EVMbench has already been released.

He doesn't need to explain anymore. Those actions speak clearer than any statement could.

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