Original｜Odaily Planet Daily (@OdailyChina)
In a previous article titled “ABCDE Stops Fundraising, Crypto Capital Urgently Needs a ‘Version Update’”, we introduced a topic based on ABCDE's cessation of fundraising—crypto VCs urgently need a version update to adapt to the new cycle and new monetization paths. With the recent warming of the crypto market, many crypto investment institutions have begun their performances; some choose to adjust their positions, some hope for new projects, and others focus on more relevant on-chain trends, stablecoin tracks, and PayFi tracks.
Odaily Planet Daily recently engaged in in-depth discussions with several leading VC institutions in the industry, hoping to explore a new path for crypto VCs in industry discussions and find new development directions for the market for industry insiders' reference. The following content mainly comes from interviews with institutions such as ArkStream Capital and YBB Capital, with some content edited.
The Times Have Changed: The Era of Crypto Chaos Has Begun, Liquidity is King
Discussing the current market situation, understanding the changes and constants of the market and the times may be the most crucial.
ArkStream Founder: The Main Line of Crypto is Still Fintech 2.0
When asked about this issue, ArkStream founder Ye Su (@allen_su1024) believes that from a longer time dimension, the dividing line of the crypto market cycle is 2023. Before this, the crypto industry was in a technological foundation development stage, similar to the former AI industry, with the main goal being industry infrastructure construction. After this, with the emergence of BTC ETF and ETH ETF, the mainstreaming process of cryptocurrencies accelerated, thus the main participant group in the market expanded from the Crypto Native crowd to the mainstream population. The specific changes include the following three aspects:
Cycle Logic: Transitioning from a narrative and attention-centric growth curve to one focused on actual applications and real income. Tokens that have seen smaller declines after 2023 require certain business support, and the historically criticized ETH has seen a decline far less than other altcoins that have dropped by 70%-90% or more.
Participant Group: Transitioning from the Crypto Native crowd to the inclusion of traditional financial sector participants, leading to significant changes in the entire market's valuation model. Compared to the seed round valuations in the Web2 industry, which range from 20 to 30 million RMB, Web3 industry project valuations often start at 20 to 30 million USD, undoubtedly creating a certain industry bubble. The decline of market tokens entering a new cycle has somewhat helped to squeeze this bubble, and I believe it will take another 2-3 years of bubble-squeezing.
Asset Distribution: From the fair distribution of the past ICO era to the “high market value, low circulation” phase of VC tokens, and now to the Meme coin and on-chain issuance model. In the early days of the industry, VCs and market retail investors started on the same starting line, participating in public offerings at the same price without lock-up periods. Now, it has returned to a similar model, primarily because the core demand of market retail investors remains the wealth effect; the mode that better meets profit needs will be pursued by most people in the market. This is also one of the reasons why former VC tokens have gradually fallen out of favor.
What remains unchanged is that the main trend of Crypto is still Fintech 2.0, which means that as a decentralized global ledger empowered by smart contracts, its core goal is not to recreate a new ecosystem of productivity but to serve the improvement of market production relations—efficient asset circulation, distribution, and decentralized operation. The focus of the past crypto industry's gaming and social tracks still falls on financial attributes, which supports this view.
YBB Capital Co-founder: Lowering Asset Issuance Thresholds Leads This Cycle
YBB Capital co-founder John (@John_YBB) also expressed a similar view, stating: “The point of change is—1. Asset issuance remains the market's ‘blood engine,’ but compared to previous cycles where asset issuance generated various narratives and repeatedly validated the maturity of the DeFi track, this cycle is more about lowering the asset issuance threshold, thereby increasing on-chain liquidity, which ultimately drives the development of Dex and derivative tools. This has not significantly propelled the overall development of the industry. 2. The funding structure is transforming, with Bitcoin spot ETF management scale surpassing 250 billion USD, and sovereign funds and traditional institutions entering the market, shifting the market from retail-driven to institution-led.
What remains unchanged is—1. Meme coin speculation and DeFi pseudo-innovation continue to cause resource misallocation. Although underlying technology iterations are ongoing, there are currently no applications landing that match the infrastructure. 2. The ‘digital gold’ narrative of Bitcoin has not changed at all, but the divide between altcoins and BTC is continuously strengthening.”
Summary: The Cycle Continues, but the Profit-Seeking Psychology is Stronger
Overall, the power of the cycle is still at play, and the entire crypto industry continues to innovate around asset issuance and distribution methods. However, the industry narrative has undergone one round of cleansing after another and has fallen into a state of exhaustion, ultimately relying on the industry’s internal “casino scale effect” and external “mainstream asset liquidity introduction.”
In other words, the entire crypto industry is now more realistic, and the profit-seeking instinct is particularly strong. Against this backdrop, the business models of crypto VCs have also undergone new changes.
A New Storm Has Emerged: VCs Set Their Sights on New Monetization Models
Looking back, after experiencing the years 2022-2024, crypto VCs cannot help but sigh: “The great wall is indeed as strong as iron.” The current market monetization model has undergone significant changes compared to the past.
Cypher&M2&Phoenix Co-founder: No Break, No Establishment, Waiting for the Next Cycle
Regarding past achievements, Cypher&M2&Phoenix co-founder Bill Qian (@billqian_uae) previously stated: “In this cycle, we invested in over 10 VC funds, all of which have very excellent GPs and captured leading projects. However, regarding our investment in the entire VC fund (we act as LP), we have already made a 60% accounting reduction, hoping to eventually recover 40% of the principal. There’s no way around it; the investment year of 2022/23 (vintage) just happened to hit, so we have to accept it.
Sometimes you did nothing wrong; you just lost to time and the year. However, for the next cycle of Crypto VCs, we are actually very optimistic because: extremes will turn into opposites. Just like the Web2 VCs in 2000 who were wiped out in Silicon Valley, the following years became fertile ground for nurturing and investing in innovation.”
Looking back now, this statement carries a hint of the era's pain but is also filled with deep hope for the next future.
YBB Capital Co-founder: From Rejecting Meme to Joining the Trend, Flexibly Choosing Tracks
When discussing the institution's own blood-generating model, YBB Capital co-founder John (@John_YBB) summarized: “Previously, YBB's main investment model was to participate in early rounds of projects, such as seed rounds and angel rounds, establishing long-term cooperative growth relationships with projects after investing, providing resources such as market media, exchanges, and communities to empower teams, with returns ranging from 10x to 100x. The tracks are more cyclical and flexible—initially focused on Infra in 2016, such as L1 public chains and underlying cross-chain protocols; subsequently, we deeply participated in DeFi Summer-related protocols, GameFi games, as well as NFT and Metaverse tracks. From 2024-2025 to date, in the market cycle dominated by Meme coins, due to the initial issuance method of Meme coins being driven by pure “hot topics,” there were not many opportunities for VCs to participate; as it developed to a certain stage, standard issuing teams emerged, including traffic marketing, community guidance, and team collaboration, with some institutions participating in investments, but since this model contradicts our industry values, we did not participate. After all, the risks far outweigh the rewards, and some projects are too greedy.
It is worth mentioning that during last year's TG ecosystem explosion, we helped several Web2 project parties bring a certain scale of Web3 new users through regional resources in the form of Mini Apps; later, we saw the development prospects of Pump.Fun and invested in some Meme Launchpad products, not missing out on wave after wave of Meme coin trends. I personally believe that a reasonable and long-term monetization method should be a business that rises and falls with the Meme craze, rather than a method of harvesting a wave of retail investors and running away. Bringing positive user growth to projects is what we have always been doing and what we consider valuable.
Currently, YBB is mainly focused on core narratives within the circle such as Dex, chain abstraction, and asset issuance platforms, as well as narratives combining Web3 with RWA, stablecoin upstream and downstream, AI, etc.; in the future, we look forward to AI economy, upstream and downstream demands of the AI industry, derivative tools for asset issuance platforms (such as GMGN and other token tracking and analysis platforms), and some narratives that have the opportunity to revive under mature technology (such as the Metaverse).”
ArkStream Founder: From Primary Investment to 1.5-Level Investment, Wild Faction vs. In-Power Faction Tracks
Regarding the focus of his business, ArkStream founder Ye Su (@allen_su1024) shared the following main viewpoints:
First, from the perspective of the entire industry, during the bull market from 2020 to 2022, the DPI (Distribution to Paid-In) of top funds could reach 20 times, while mid-level funds were around 5-10 times, and institutions with less than 5 times performed relatively poorly; in the current cycle, the DPI of ordinary funds is about 1, while excellent funds perform between 1-3 times, with very few achieving higher returns, resulting in a significant decline in overall returns.
Second, taking ArkStream itself as an example, the team previously focused on primary VC investments. Due to the relatively good liquidity performance in the crypto industry, compared to the Web2 venture capital industry, which has a single exit mechanism (only through IPOs to realize capital gains), the unlocking period was as short as 1-2 years, making it relatively easy to obtain high returns from liquidity arbitrage opportunities, a characteristic determined by the attention economy of the crypto industry. After 2023, influenced by regulatory forces and exchange policies, the unlocking periods for many project tokens have been extended to 2-3 years, or even 4-6 years, reducing liquidity arbitrage space and diminishing primary market dividends, with only a few institutions able to achieve high returns. Therefore, OTC investments have become a key business for some. The usual operation is to select mature projects where risks are easier to control, with more predictable liquidity and discounts, shortening the investment cycle to about a year, thus reducing the difficulty of judging cycles.
Finally, regarding the key directions of future focus, ArkStream can be said to be an investment institution highly attentive to Meme coins. Although there have not been many actions at the institutional investment level, there has always been attention to financial infrastructures and new on-chain opportunities that can be termed as “wild faction,” including the Trading Bot track and on-chain derivatives, as well as relatively more “orthodox” assets in tracks like RWA and PayFi payments. We also look forward to establishing deep connections with projects in these two directions and welcome entrepreneurs and project parties to contact us for collaboration.
Summary: On-chain Becomes the Next Gold Rush Area
In summary, the phased consensus among VC institutions is to seek innovative projects related to on-chain transactions, combining mainstream narratives like AI, and in the current environment of tight and concentrated liquidity, they anticipate the emergence of endogenous innovations in the industry, which is also influenced to some extent by the Trump administration and the regulatory environment in the United States.
New Variables in Crypto: Trump's Attitude Will Influence the Industry Direction to Some Extent
It must be said that Trump's election and presidency have had a lasting and profound impact on the crypto industry. His rise not only accelerated the early emergence of Bitcoin's new highs but also laid a relatively friendly policy foundation for subsequent crypto regulation. However, the tariff trade war initiated by Trump once caused both the U.S. stock and crypto markets to plummet, and his subsequent attitudes and actions will continue to influence the entire cryptocurrency market.
Waterdrip Capital Founder: The Era of Chaos Has Arrived, Crisis Coexists in the Crypto Industry
As Waterdrip Capital founder Dashan previously mentioned in the article “New Logic of Web3 Entrepreneurship Under the New Global Trade Order”: “Since Trump returned to the White House, a series of unexpected economic and political measures have caused continuous turmoil in global markets. Among them, one of the most shocking measures has been the escalation of tariff policies. Investors remain filled with concerns about future uncertainties, and the global financial system seems to have entered a ‘chaotic era.’
On the other hand, a series of actions indicate that the U.S. intends to anchor Bitcoin alongside gold as a new financial system. The combination of dollar stablecoins, gold, and Bitcoin may outline the prototype of a ‘new dollar order’—maintaining the legal status of the dollar while being supported by physical and digital assets to enhance risk resistance.
In the second half of crypto, simple traffic strategies are no longer sustainable; instead, a startup logic centered around hardcore value is emerging. In the current market environment, new opportunity directions for entrepreneurs mainly include: the Bitcoin ecosystem (including BTCFi), other public chain ecosystems (including DeFi), real-world assets (RWA), payment finance (PayFi), and crypto concept stocks, etc.”
YBB Capital Co-founder: Trump Has Become a Liquidity Black Hole, Crypto U.S. Stockization Has Become Inevitable
When discussing Trump's influence, YBB Capital co-founder John (@John_YBB) provided a different answer.
He believes that “the impact of tariffs and trade wars on the crypto industry is not significant, while the main influence of Trump's presidency on the market is reflected in volatility and liquidity.
In terms of volatility, the uncertainty of Trump's policies has had a noticeable impact on U.S. stocks, and since China began to phase out mining machines and mainland users, the volatility of the crypto market has gradually shown a trend of ‘U.S. stockization.’ At the same time, the completion of the Bitcoin spot ETF also signifies that Crypto is moving towards its final form—U.S. stockization. The spot ETF classifies Bitcoin as a commodity, which means it must adhere to commodity rules similar to those for stocks and bonds in terms of taxation. Additionally, the ETF divides Bitcoin into ‘white’ and ‘black’ parts: the white part loses the original demand drivers of decentralization and anonymity in market supply and demand relationships, retaining only its speculative financial attributes, with its value backing shifting from decentralized chains to centralized governments; while the black part represents the ‘orthodox’ Bitcoin that still retains its original attributes. However, the market's dominance is gradually shifting towards ‘white Bitcoin,’ with the largest players transitioning from grassroots forces to the U.S. government and its capital forces.
Changes in liquidity are often more lethal than the policies themselves. In Web3, attention = liquidity. Trump has transformed political attention through the Meme coin TRUMP into assets, constructing a narrative liquidity black hole through ‘identity narrative + asset creation + public opinion manipulation.’”
ArkStream Founder: Bitcoin's Next Rival is Gold
Regarding the “Trump effect,” ArkStream founder Ye Su (@allen_su1024) believes it is necessary to look at the impact on Bitcoin, which serves as the industry benchmark.
After experiencing two major development stages of “technological foundation → mainstream asset,” the main influence of Trump's presidency and policies lies in whether it can promote Bitcoin's transformation into a global safe-haven asset. In the next five to ten years, the industry should focus more on whether Bitcoin can achieve an asset status equivalent to gold. Especially important is whether U.S. sovereign funds can facilitate this process. If this can be achieved, then Bitcoin's growth potential remains enormous, as it still has 8-10 times the market value compared to gold; if it cannot be achieved, then Bitcoin's development space will be relatively limited.
Summary: Crypto is No Longer Niche and Cannot Stand Alone
Regardless, the dramatic and conflicting policies implemented by Trump bring a high degree of uncertainty and opportunity to the cryptocurrency industry—the former is reflected in the market's volatility and the “price impact” exerted by Trump himself through WLFI, TRUMP, and other token projects; the latter is reflected in the further enhancement of Bitcoin's safe-haven attributes, as well as in crypto concept stocks, the stablecoin industry, and the PayFi track.
Conclusion: There Are No Mismatched Assets, Only Mismatched Projects
Finally, we conclude with the question of whether there are mismatches in the crypto market. After understanding the main viewpoints of many representatives from capital institutions, the key points I have summarized are as follows:
From a micro perspective, there are indeed mismatches in the crypto market regarding market capitalization versus project business, valuation versus actual application, token airdrops versus short-term speculation, exchanges versus project parties, and project parties versus users. The market as a whole still struggles to find a balance between “expectation-driven” and “value realization,” and the healthy development of the industry cannot be separated from aligning with the value logic of “how much is used, how much is worth”; otherwise, innovation cannot be discussed.
From a meso and macro perspective, whether it is retail funds or VC capital, all liquidity will flow to places with higher efficiency. Where there is a wealth effect, capital will respond, and attention hotspots will emerge accordingly, whether it is the Solana, Base, BSC ecosystems, or Meme coins, AI Agent concept coins, airdrop harvesting, or new listings on exchanges, all cannot escape the user market. As ArkStream founder Ye Su (@allen_su1024) stated: the core of the market is mainly determined by user demand, and retail investors, as the “silent majority,” actually play a leading role. Therefore, products and issuance models need to adjust in a timely manner with the market, rather than remain unchanged. From this perspective, the crypto industry has never had simple mismatches; rather, it is structural adjustments caused by changes in industry cycles and user demand.
Regardless, crypto never sleeps, and liquidity flows like water. Ultimately, what can create waves is not mismatched projects, but timely assets.
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